Electrical industry: full order books—poor business climate

The electrical industry is faced with a whole range of problems. Although the order volume is at an all-time high, supply bottlenecks and a lack of skilled workers are clouding the business climate.

In spite of the war in Ukraine, the lockdown in China, supply chain problems, an uncertain energy supply and the never-ending pandemic, the German electrical and digital industry still managed to increase exports in April 2022. According to the sector association ZVEI, it exported goods worth €17.7 billion—an increase of 1.9 percent compared to the previous year. In the first four months of this year, aggregated industry exports increased by 4.3 percent year-on-year to €75.5 billion.

However, imports of electrical and electronic products into Germany once again exceeded exports in April, rising by 12.4 percent in value to €18.9 billion. Cumulative electrical imports from January to April amounted to €79.5 billion (+ 12.7 percent year-on-year). In the first quarter of 2022, Germany’s foreign trade balance in electrical goods actually showed a quarterly import surplus after more than 20 years.

Exports to the USA, on the other hand, were very robust, as in previous months, with year-on-year growth of 17.1 percent to €1.8 billion.

Business with the EU

Deliveries to the EU totaled €9.0 billion in April - an increase of 1.2 percent compared to the previous year. Exports to the Netherlands (+ 6.7 percent to €1.0 billion) and Poland (+ 3.0 percent to €826 million) in particular showed above-average growth. Exports to France showed a slight increase (+ 0.7 percent to €1.1 billion), while exports to Italy (- 2.2 percent to €928 million) and the Czech Republic (- 5.6 percent to €770 million) were down.

At €2.0 billion, exports to China in April remained roughly at the previous year’s level (+ 0.2 percent).

By contrast, business with Russia and Ukraine slumped sharply again owing to the war. At €56 million, exports to Russia fell short of the previous year’s level by more than four fifths, while those to Ukraine shrank by 45 percent to €23 million.

Gloomy business climate in spite of the rosy order situation

Only eight percent of firms currently have too few orders. In the first four months of this year, there were 13.9 percent more orders than in the previous year. Domestic orders increased by 13.0 percent, while orders from abroad rose by 14.5 percent.

Although capacity utilization at the beginning of the second quarter was slightly lower at 87.9 percent than three months earlier (88.5 percent), the order backlog increased from 4.8 to 5.7 months—an all-time high.

However, 90 percent of companies are affected by supply bottlenecks and almost half have insufficient specialist staff. Thus, following the sharp correction in March, the business climate deteriorated again in April and May—for the third month in succession. According to the ZVEI, the decline was due to a significant change in their assessment of the current situation. General business expectations recovered, although not significantly. Nevertheless, companies raised their production and employment plans somewhat again in May.