In the second quarter of 2023, East German mechanical and plant engineering suffered a setback. Companies continue to look back on a substantial order cushion of six months, but important economic indicators such as capacity utilization and investment activity fell significantly. This is also reflected in the assessment of the current business situation: 68 percent of the companies rated their overall situation as positive - in the first quarter of 2023 this was still said by 78 percent of the companies. More and more companies are also skeptical about short-term business opportunities. On the other hand, the declining mood has hardly had any effect on personnel planning. This was the result of a survey by the VDMA East among the 350 members in Berlin, Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia.
“The order books are still full. But that hides the actual situation. Rather, we fear that the situation and mood will deteriorate noticeably,” says Oliver Köhn, Managing Director of VDMA East. According to this, the companies are currently working off the accumulated orders, but the order cushion is melting. "Customers think very carefully about whether to invest in new machines and systems, postpone projects or even postpone investments completely," explains the regional association's managing director, Köhn.
Capacity utilization influenced by order fluctuations
About half of the eastern German machine builders assessed their economic situation as "good" in the second quarter of 2023 (53 percent). Another 15 percent rated it as "very good". Almost every third company, on the other hand, rated their own situation negatively (32 percent). The increasingly cautious and fluctuating order situation is reflected in capacity utilization. By the middle of the year, the companies were using their existing capacities to an average of 85 percent - this value is around 3 percentage points below that of the previous quarter and for the first time in around two years below the long-term national average of around 86 percent.
Big difference between order situation and business expectations
The orders currently last for an average of around six months of production until the beginning of January 2024. However, there are considerable differences within the industry. The backlog of orders is between one month and one and a half years.
“Significantly fewer companies than recently can also look forward to an increase in orders compared to the previous quarter. Their share fell from 36 percent in the first quarter of 2023 to 21 percent in the second quarter of 2023. In contrast, the number of companies with a drop in orders increased from 32 percent to 40 percent. That's worrying," says Köhn.
The hesitant investments do not only come from the customer industries. The investment plans of machine and plant manufacturers also influence the diverse business risks. The proportion of companies that spent less money than planned on new machines, technology, research and development climbed from 13 percent at the end of 2022 to 27 percent by mid-2023. The industry is divided when it comes to short-term business prospects. Half of the companies expect business opportunities to remain the same until the end of September 2023 (51 percent) - many of them are currently looking at a good economic situation. In addition, about every fourth company expects better prospects (23 percent) or worse business (26 percent).
Continued dynamic employment intentions
Despite the economic slowdown, mechanical and plant engineering remains a stable sector for employees. 53 percent of the companies want to keep the current number of employees until December 2023 and 35 percent of the companies want to hire new employees. The search for suitable workers, on the other hand, remains difficult. According to the survey, 82 percent of the companies had problems filling vacancies.
"The reasons for this are diverse. The demographic development, competing employers and deficits in the transport infrastructure in rural areas, but also the increased technical requirements play a role,” explains the state association's managing director Köhn.
