German industry shows signs of slowdown

Germany’s industrial sector appears to be slowing down, as companies warn of weak demand from key export markets such as China and the euro-zone debt crisis saps the willingness of businesses to invest. Joe Kaeser, the chief financial officer of Siemens (pictured), said that it had become more difficult for the German industrial conglomerate to meets its full-year goals. A slowdown in Germany’s industrial heartlands would deal a blow to suppliers in other parts of the euro-zone as buoyant German demand (fuelled by exports to emerging markets) has until now helped to cushion the impact of problems in Europe’s periphery.

“Unfortunately, what we have been seeing in the last eight weeks is that short-cycle businesses are considerably weaker than we were originally thinking,” Mr Kaeser told Bloomberg News. Short-cycle products (which for Siemens includes industrial automation and drive technology) are those ordered, paid for and delivered in a relatively short period of time, so they tend to be among the first to indicate a slow-down in the economy.

Mr Kaeser said it would be “quite a rocky road” to meet his company’s targets for 2012. “We expect a very weak China for the remainder of fiscal 2012,” he added.

Meanwhile, Martin Winterkorn, the chief executive of Volkswagen, told investors that “darker clouds” were gathering around the car industry. Because of the European sovereign debt crisis, he said, “the second half of 2012 is certain to become more difficult and challenging for the automotive industry as a whole”.

German engineering orders declined in April by 11% in real terms compared to the previous year, and an index of purchasing managers reveals that the manufacturing sector contracted at the fastest pace for almost three years in June. Bernd Laux at JPMorgan Cheuvreux said: “Germany is the last man standing. If German industry falls, then the outlook for the rest of Europe is bleak, but we are not yet in a situation where it’s clear that growth has come to a halt. In general, I expect German capital-goods manufacturers to remain in a stronger position than almost anyone else.”