Global engineering: Only modest production growth in 2024, sustained by the Asia Pacific region
We expect global mechanical engineering output to increase by 0.5% in 2024. This modest expansion is mainly due to growth in Asia Pacific, while activity in North America and Europe is subdued.
However, there are signs that activity is bottoming out in Europe and the US. We expect global mechanical engineering production to rebound by 5.1% in 2025.
US mechanical engineering: Looser monetary policy should help to trigger a recovery in 2025
After a 2% contraction in 2023, we expect US mechanical engineering output to shrink again in 2024, by 0.7%. Tighter lending conditions have created a spillover-effect of reduced business formation.
We expect US mechanical engineering output to rebound 3.7% in 2025, as macroeconomic factors become more favourable. Together with public infrastructure projects, expected monetary easing in H2 of 2024 should help to increase investment in machinery.
In the mid to long-term, demand for automation, digitalisation, and sustainable production solutions in manufacturing should support machinery demand.
China: robust sector growth, but issues in some machinery segments
We expect Chinese mechanical engineering output to increase by 4.1% in 2024 and by 6.2% in 2025. Growth is supported by fiscal expansion for the manufacturing sector to grow production capacity.
However, the property sector is still plagued by weak buyer demand for new homes and worsening financing difficulties affecting developers. As a result, production of construction machinery is forecast to contract by more than 19% this year.
Japan: Downturn triggered by woes in the automotive industry
We expect mechanical engineering output to decrease by 4.4% in 2024. The main reason is a 16% output contraction in the automotive sector in Q1 of 2024.
Domestic construction activity, which accounts for 13% of engineering demand, is slowing down. This shoild result in a 5.7% decrease in construction-related machinery production in 2024.
Eurozone: additional ECB interest rate cuts should drive a recovery in 2025
We expect mechanical engineering output in the Eurozone to contract by 2.9% this year, as higher interest rates have weighed on machinery demand from key buyer industries.
In 2025 we expect a rebound of about 3% in mechanical engineering production, as interest rates cuts by the ECB in H2 of 2024 should support additional machinery investment.
German machinery production is forecast to contract by more than 4% this year. The industry continues to struggle across all subsectors, and we expect an insolvency increase in the low double-digit percentage range in 2024.
After a mild contraction in 2024, Italian mechanical engineering output is forecast to grow by about 3% next year. Lower interest rates should help to shore up private business investments.