Industry trends machines engineering January 2025

A global rebound is underway, but Europe still lags behind

10 Jan 2025

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We expect global mechanical engineering output to rebound by 3.6% in 2025 after a 0.9% contraction last year. Region-wise the recovery is fuelled by the Americas (mainly US) and Asia Pacific.
Apart from the agricultural machinery segment, global production in the main subsectors is forecast to show robust growth this year. Ongoing monetary easing by central banks should lead to increased capital expenditure in the coming months.

After contractions in 2023 and in 2024, we expect US mechanical engineering output to rebound by 5.4% in 2025, with solid growth across all subsectors.
In 2026 we expect machinery output to grow by about 5% and investment in machinery to increase by 7%. Growth drivers should be the extension of tax cuts and government spending by the new administration.
However, import tariffs and curbs on immigration are downside risks for industrial production and machinery demand in the mid-term.

While private capital expenditure remain subdued, mechanical engineering is supported by government investment in strategic sectors such as high-tech, automation, and climate/energy. After a 2.7% growth in 2024 we expect Chinese mechanical engineering output to increase by 4.4% in 2025.
A major trade dispute with the US remains a major downside risk. We assume that the incoming Trump administration will gradually implement a 25% tariff on Chinese machinery, electronics, and chemicals imports starting in 2026.

After a 6.8% contraction in Japanese mechanical engineering production last year, we expect a 3.7% rebound in 2025 and a 4.7% increase in 2026.
Rising Japanese exports of special-purpose machinery for semiconductor manufacturing will support sector growth in the coming months.

After a 4.9% contraction in 2024 we expect mechanical engineering output in the EU to grow by only 1.3% in 2025. The outlook for the manufacturing sector remains highly uncertain, particularly due to Germany´s economic weakness.
We expect an improvement in the course of 2025 and into 2026, as the effect of recent interest rate easing will materialise, supporting demand from key buyer sectors. In 2026 EU machinery production is forecast to rebound by 3.4%.
However, a potential trade war between the EU and US is a major downside risk for the export-driven machinery industry. In addition, fiscal woes in several countries (e.g France) could have a negative impact on machinery investment.
German machinery production contracted by 5.7% in 2024 and another decrease of 0.6% is expected for this year. The industry continues to struggle across all subsectors, due to weak demand from key buyer industries like automotive and construction. We expect machinery business failures to increase further in 2025.

For more a more comprehensive assessment of the performance and credit risk of the mechanical engineering industry please download the report below.

Summary

We expect robust growth of mechanical engineering output in 2025 and 2026 after a contraction last year.
However, a modest production outlook for Europe in 2025 will drag on the global recovery. Germany´s machinery production is likely to contract again this year.
The shift towards electric vehicles will lead to changes in machinery supply to the automotive sector. Across all regions, we expect sector growth to decelerate in the long-term.