The important German industrial sector achieves a high in exports – despite the weak global economy and a lot of uncertainty about the Ukraine war. The overseas business in particular is growing strongly.
German mechanical engineering companies increased their exports to a record level last year. Despite the weak economy and uncertainty about the Ukraine war, exports grew by a good six percent year-on-year to 192.4 billion euros, according to the VDMA industry association in Frankfurt. However, higher prices in the wake of inflation boosted exports. Adjusted for prices, they fell by 1.3 percent.
“Although the annual balance sheet has nice price effects, the result is also impressive in real terms,” said VDMA chief economist Ralph Wiechers, looking at the preliminary figures from the Federal Statistical Office. The sharp decline feared by many did not materialize in 2022.
Strong fourth quarter
Wiechers explained that the fourth quarter in particular was strong with a nominal increase of 9.3 percent. The disruptions in the global supply chains would have continued to dissolve. “In addition, the export expectations of machine and plant manufacturers have recently increased – a good omen for the start of the new year 2023.”
Last year, the USA remained the most important export market for the mechanical engineering industry, which is a key German industry with more than a million employees. Exports to the USA grew nominally by 20 percent to 24.8 billion euros. The machine builders benefited from the weak euro against the dollar, as it makes goods cheaper for customers outside the euro zone.
Meanwhile, exports to China fell by 2.3 percent to 18.9 billion euros. This means that almost 13 percent of German machine deliveries went to the USA and almost ten percent to China. While the US economy is very robust, growth in China’s industry has slowed since the second quarter, it said.
Europe as a sales market even more important
But Europe was even more important as a sales market for mechanical engineering: exports to the EU rose by five percent to 84.4 billion euros, with almost 44 percent of exports going to the EU partner countries. Russia, on the other hand, only plays a minor role. Machine exports there collapsed almost by half to 2.8 billion euros due to the sanctions resulting from the Ukraine war.
German mechanical engineering has had a year with many adversities. Nevertheless, the VDMA assumes that production in the industry will have increased by one percent in 2022, adjusted for price.
For this year, the VDMA expects a slight real decline in production of two percent. Because the environment remains difficult: Growth in China is weakening, the war in Ukraine is keeping energy prices at a high level, economists believe that high inflation will only fall slowly and interest rate hikes by the central banks are making investments more expensive.
Source: Stern
