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Mechanical engineering in Germany: Where do we stand?

Mechanical engineering in Germany: Where do we stand?

Last quarter of 2018 and the first quarter of 2019 has not been a very positive one for Germany, but nevertheless, 2019 still looks to be a positive year as Industry 4.0 and similar advanced technologies start to penetrate deeper into German manufacturing set-up. Going forward, these technologies will become the new growth drivers of German manufacturing industry.

Traditionally seen as the powerhouse of Europe, Germany’s economy is starting to cause concern with uncertainties over global trade and the manufacturing industry. In January 2019, the European Commission revised the growth forecasts for the country and is now expected to grow by 1.1 % this year, from a previous forecast of 1.8 %. Germany is Euro zone’s largest economy, this means that any deceleration will likely be bad news for the rest of the ­Europe as well. The Commission also lowered its prospects for the Euro area as a whole. The region is now set to grow by 1.3 % this year, from a previous forecast of 1.9 %. The slowdown was caused mainly by factors, like global trade tensions and weakening exports growth due to slowdown in emerging economies including China. Recent data from the German statistical office shows that the country posted a growth of 1.5 % in 2018, as compared to 2.2 % in the previous year. German industrial production also declined by 0.4 % month-on-month in December — following a fall of 1.3 % in November, making this the fourth consecutive month of decline. This has been the weakest growth rate in five years. Also, factory orders data showed a 1.6 % decline in December.

While we have to brace ourselves for another weak quarter in the first quarter of 2019, there could be some positive momentum in the spring. With serious trade negotiations between the U.S. and China under way, and UK’s Brexit on-going negotiations, chances are that progress on these issues will be the game changer that could turn the sentiment around. This would bring around a humble return in growth momentum in Germany and the euro zone. In case of an economic downturn, the German government is working on bringing in tax cuts and increasing government spending. Though many experts have discouraged general tax cuts for Germany in recent years, due to high state debts, the finance ministry believes that such measures would be justified as a means against a possible recession. Speaking to a German newspaper, the Finance Minister Olaf Scholz said, “The good times in which the state kept taking in more taxes than expected are coming to an end,”.

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Source: Vereinigte Fachverlage GmbH


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