Throws up an option when choking

The virus is stifling the economy : Industry is in recession

German industry will not emerge from the recession this year. Mechanical engineering - with a good one million employees, the most employable area - expects a production decline of five percent. In contrast, the chemical industry looks relatively stable with a current forecast of minus 1.5 percent. "The spread of the corona virus is noticeably setting us back," said mechanical engineering president Carl Martin Welcker on Thursday. Even if the situation eases in the second half of the year, “we will no longer be able to make up for the additional declines this year”. According to a recent survey by the Munich Ifo Institute, 63 percent of industrial companies are already affected by the corona virus. In this situation, quick action is "essential", said machine builder Welcker and praised the expansion of short-time work and the assumption of social contributions for lost hours by the Federal Employment Agency.

Good opportunity for claims

But that's not enough for mechanical engineers: like economists, the largely medium-sized industry would like interest-free deferral of income, corporation and sales tax, an expansion of the loss carry-back beyond one million euros and "significant depreciation relief". Welcker took the opportunity to reiterate the demand for an expansion of tax research subsidies.

The production of mechanical engineers had already fallen by 2.8 percent last year. Above all, the trade conflicts forced by US President Donald Trump and the structural change in the auto industry are causing problems for the industry. According to the association, events in China are currently normalizing. Production on site is starting up again, but delivery problems are still to be expected. Foreign locations contribute a quarter to the added value of German mechanical engineers, and China in turn accounts for around three percent.

The chemistry is not right

In the chemical industry, the worst seemed to be over at the beginning of the year, and the VCI association was expecting a small plus for 2020 after two weak years. Then the virus came. After all, according to the VCI, sales in the sector will remain stable at 196 billion euros. But all in all, the forecast for the next few months is "with considerable reservations," said Wolfgang Große Entrup, Managing Director of the VCI. In two months at the earliest, it will be known how much the virus is affecting the industry.

The positive signals that were still given in January with the end of the hangover over Brexit and an easing of the trade dispute between China and the USA are over. "The virus is a serious risk for the global economy." In his forecast, Große Entrup leaves out the business of subsidiaries of German corporations abroad. China plays an important role in this. While chemical products worth around nine billion euros are exported to China from Germany, subsidiaries of German corporations have sales of 23.5 billion euros there. "The negative effects of the coronavirus epidemic in China could therefore be more serious than in our approach," said the head of the association

State under stress

“Companies that are in trouble because of Corona need support. Politicians reacted quickly and appropriately, ”says the VCI managing director. However, it will only work out in the next

Weeks show whether that is enough. In addition to the promised changes in short-time work benefits and liquidity support, he also considers guarantees for loans, tax deferrals, tax cuts and the creation of a special fund for particularly affected companies to be possible options. “The state will probably also have to share in the costs of the economy caused by the epidemic,” suspects Große Entrup.

2019 was a bad year for the chemical industry with its 464,000 employees. Production shrank by 7.6 percent and sales by 3.3 percent. Große Entrup blames protectionism, the Brexit disaster, the “industrial policy reform backlog” in Berlin, the level of taxes and deficits in the infrastructure. In addition, many industrial areas were in a profound structural change, said the chemical association chief with a view to the auto industry.

The craft is doing brilliantly

Business in the trade is practically unencumbered by the corona virus. In a recent Creditreform survey, 76.2 percent of those questioned still rated the business situation as very good or good. The mood has hardly changed compared to the previous year. In the construction-related trades, the number of positive reviews even increased again. On the other hand, the mood in the metalworking and motor vehicle trades has clearly deteriorated, where the weakness of the industry is apparently making itself felt. And yet: The skilled trades are also increasingly worried about an economic downturn, and this in turn is reflected in the willingness to invest, which, according to Creditreform, has fallen to its lowest level since 2015.

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