* Engineering trade body hikes 2012 output forecast on
* VDMA says decline in orders to impact production more in
* Says forecast for 2 pct 2013 growth hinges on euro crisis
By Sarah Marsh
BERLIN, Sept 6 Germany's engineering trade body
raised its forecast for sector output in 2012 to two percent but
said declining orders were increasingly weighing on production
and its estimate for two percent 2013 growth hinged on an
improvement in the euro crisis.
The engineering sector, which is Germany's largest
industrial employer and includes household names such as Siemens
, has helped Europe's largest economy fare better than
the rest of the 17-nation euro zone throughout its 3-year long
debt and financial crisis.
"We started better than expected at the start of the year.
That raises our results for the full year," said the VDMA
engineering trade body, which had forecast stagnation over the
whole of 2012 in February.
The VDMA represents over 3,000 mainly small and medium size
member companies but also large companies such as MAN SE
It said production by its members expanded 4 percent overall
in the first half of 2012 but had decelerated from 8.1 percent
in the first quarter to 0.2 percent in the second.
Overall growth in Germany's economy slowed in the second
quarter of this year to 0.3 percent from 0.5 percent in the
first and a string of increasingly gloomy data has raised the
possibility of recession in the second half of the year.
The VDMA said an unrelenting decline in orders in the first
half of the year would weigh on production in the second half.
Orders in the broader manufacturing sector fell 1.7 percent in
June, although data due later on Thursday is expected to show
them inching up 0.2 percent in July.
Signs of weakness in the engineering sector are increasing.
German industrial group Robert Bosch GmbH said last
month it was in talks with workers at its engineering unit,
Bosch-Rexroth, to cut their work hours in response to weakening
demand from industrial customers.
The VDMA said it expected production to shrink in the first
quarter of 2013 before powering ahead once more, saying it
expected further full-year growth next year of two percent, on
condition of a de-escalation in the euro zone crisis.
"We are aware that this forecast would not withstand an
exacerbation of the problems in the euro zone," said VDMA
Managing Director Hannes Hesse.
All eyes in the crisis are on the European Central Bank,
expected on Thursday to detail plans for a new bond-buying
progamme to help bring down soaring borrowing costs for Spain
ECB President Mario Draghi has promised to "do whatever it
takes" to preserve the euro.
A further factor likely to boost engineering output next
year would be a pick-up in China's economy, a major export
market for the sector, the VDMA said.
The world's No. 2 economy has slowed for six straight
quarters and is at risk of missing Beijing's annual growth
target of 7.5 percent.