UPDATE 1-Debt crisis to weigh on German engineers - VDMA

Thu Sep 8, 2011 7:32am EDT

* VDMA sees 2012 engineering output growing 4 pct

* Affirms 2011 outlook for 14 pct output growth

* Growth to slow over course of 2012

* Return to growth depends on debt crisis solution - VDMA head (Recasts, adds comments by VMDA president)

By Peter Maushagen and Maria Sheahan

FRANKFURT, Sept 8 (Reuters) - Germany's engineering industry faces slower growth next year and will only see business pick up again if there is an effective solution to the European debt crisis, trade body VDMA said.

"Engineering output will reach its peak in real terms during the course of 2012," VDMA President Thomas Lindner told journalists on Thursday, according to a prepared speech text.

VDMA, which represents a sector that is the largest industrial employer in the euro zone's biggest economy, sees German sector output growing by 4 percent in 2012, compared with expected growth of 14 percent this year.

The rate of increase will slow from month to month over the course of 2012, Lindner said.

One reason is that measures being taken in Asia and Latin America to fight economic over-heating and inflation will dampen demand. Also, continuing financial market turbulence is having a ripple effect that progressed from early indicators to new engineering orders, output and sales, he said.

"We cannot rule out that the most recent turbulence is already impacting our orders here and there and that it will continue to have an impact," Lindner said.

Companies such as Siemens (SIEGn.DE), ThyssenKrupp and MAN SE count among the biggest names in the sector, which made Germany the world's top exporter until it was unseated by China in 2009.

In the first seven months of the year, engineering output in Germany rose by 16.4 percent in real terms, and capacity utilisation at factories was at an above-average 89.9 percent in July, VDMA said.

But data showed earlier on Thursday that Germany's trade surplus narrowed in July to its lowest level in 18 months on a stronger-than-expected drop in exports, adding to signs a global slowdown is starting to weigh on Europe's top economy.

Lindner called on politicians, especially German Chancellor Angela Merkel, to take ownership of the European debt problem and develop sensible tools for a coherent euro zone.

"The key condition for repeated growth in our industry is an effective, trend-setting battle against the euro and sovereign debt crisis," Lindner said. (Editing by Hans-Juergen Peters, Ron Askew)