German economic and textile outlook for 2013
By Virginia F. Bodmer-Altura
The Deutsche Bank has released its traditional report on Germany’s economic sector activities of the ongoing year and the outlook for 2013, and we have a deeper look into textile relevant areas
Mechanical Engineering is the German champion for 2012
The first conclusion to take from the Deutsche Bank’s survey is that the German industry faces a weak winter half of 2012. The economic crisis in several EMU countries decreased orders from the EUR area by 14 % on a year to year basis in the first eight months of 2012, but these drops where compensated up to now by other fast growing markets, especially from Asia, but also in that region economic activities are revised downwards, leading to the estimate that Germany’s industrial production in 2012 will be merely with zero growth in real terms.
The industrial German champion for 2012 is the segment mechanical engineering with a real growing output of 2.5 % on an annual basis. But also this sector is facing now declining orders and probably will grow in 2013 in parallel with Germany’s total average industrial output.
The sector has also another problem to solve, there are not enough qualified engineers available in Germany and there are some actions in place to remedy this situation on the long run.
Weak textile production but slight pick-up in 2013
The first eight months production of 2012 were below the levels of 2010 and 2011, production output of textiles fell 7.0 % and clothing 8.0 % majorly not for domestic reasons, but textiles are mostly exported to Europe – in 2011 the share was 84 % and the Euro Zone had a share of 38 %) – and also clothing deliveries went to 94 % to other European destinations and the Euro Zone had a share of 58 % in 2011. The domestic problems have been showing up lately, because of the weakening of the German economy as to compare with the two previous years, and affected also the manufacturing sector being of growing customer signification, leading to the fact that also Technical Textiles production shows a decline.
According to the German Association Industrieverband Veredlung, Garne, Gewebe, Technische Textilien, the order intake of Technical Textiles has been decreasing by 5 to 20 % depending on the market segment and according to diversification of the individual manufacturer. Also the order behaviour has changed and customers are ordering only quantities, they absolutely need and they decrease their stocks. But the segment notes also lesser orders from China, India and Russia. Additionally in these countries ,Technical Textiles will grow only at a rate between 3 to 5 %, in 2010-11 the growth rates were 5 to 10 %. It is expected that an economic upturn will take place in mid-2013 or beginning of 2014.
The dislocation of production to foreign locations is still hampering the clothing industry’s performance, but the process is far advanced.
Deutsche Bank’s findings expect for the remaining year that the textile industry will maintain the actual production level and that production will show for 2013 a moderate gain, with technical textiles likely to perform better than clothing and the home and household textile sectors. All in all, the German textile industry will present a production decline of 6.0 % in real terms and an estimated increase of 2 % in 2013. For the clothing industry, the bank is expecting a further downward trend to the end of 2012 of 5.0 % for the year and to continue in 2013 with another decrease of 3 %.
The Chemical Industry
Chemicals showed already in 2011 a moderate growth rate of 1.3 % in real terms and the production in 2012 will result in a significant production decline. The sector headed into the current year with an underperformance of 4.3 % and tended since then sideways, with noticeable fluctuations reflecting the general sluggishness in the industrial sector and the running down of inventories of industry’s companies. Output and order intake are still far below a year-earlier level. During the first eight months of 2012, order activities declined by 4.6 %, as to compare with the same timeframe of 2011.
The chemical industry has benefited from robust growth in Asia, adding to an increased turnover was the USA, as well as the relatively small Latin American market. By contrast, deliveries of German chemical products to the rest of Europe, the sector’s most important market, have been on decline. Business in the Euro Zone seems to be difficult for the rest of the year, and as well in 2013. Foreign orders have shown some positive trends lately and they were increasing in the second quarter by 3.5 % thanks to Non-EMU orders, but since growth is easing in Asia and there are no clear stimuli coming from America, there is an inherent risk that the growth of these markets will no longer offset the cooling of activity in Europe.
Overall, Deutsche Bank expects the chemical industry to shrink by 2.5 % in real terms in 2012 with stagnating production in the months to come and due to weak domestic growth and minor stimuli from abroad. However, it is likely that the early-cycle sector will see a slight recovery in production at the end of the year and a growth in 2013 at a rate of 1.5 %.
It has to be observed that prices were up mostly due to higher commodity prices (+ 7.0 % annually), with a peak in June, and this upturn has been supporting the turnover of the sector. The recent weakening of the crude oil price, especially of naphta (- 4.7% in the second quarter), eased somewhat the operational conditions and improved margins. All in all, producer prices were only up by slightly more than 3 % on a year to year basis and in the first eight monthsof 2012.
The forecast of Deutsche Bank for the industrial sector at a glance:
Conclusions
In general terms, the forecast of Deutsche Bank on the German industrial sector will depend on the progress in resolving the euro crisis and the course of economic growth, however there is to note a progress in a worsening of the economic crisis on account of the austerity policies pursued in various EMU countries – the potential destination of German exports, and also other geographical areas will be less performing, because their economies are likely to cool down in the next months, thus, these facts could result in another year of stagnation in the industrial growth in Germany.
The forecast of the German bank is also confirmed by the latest numbers published by Gesamtverband textile+mode as far as to the German textile and clothing industry.
The situation of the German textile machinery manufacturers is – according to Textile-Futures insights – a bit different, and is depending on the market segments, newly introduced products and individual company strategies. However, it is indisputable that this branch of industry is challenged by the global economic development in the next months. Most of the companies active in this sector have still a good order backlog and they profit also of after ITMA deliveries, and up-coming important technical exhibition offering opportunities for new orders, especially in Asia, and the demand for machines with “blue competence”, meaning high efficiency and sustainability, is still growing worldwide.
We thank Deutsche Bank for allowing us the reproduction of the tables.