According to Eurostat, industrial production in the eurozone remained stable in January 2025 compared to the previous year, while the EU experienced a slight decline of 0.2%. However, monthly data reveals an increase of 0.8% in the eurozone and 0.3% in the EU compared to December 2024, which saw respective declines of 0.4% and 0.2. This mixed performance reflects the ongoing economic uncertainty in the European manufacturing sector.
According to the German Machine Tool Builders' Association (VDW), a turnaround is anticipated in the second half of 2025. In 2024, orders in the German machine tool industry dropped by 19%, with foreign orders decreasing by 24%. The United States continues to be a strong market for German manufacturing technology, but trade tensions and tariffs pose risks.
In January 2025, the industrial sector in Germany experienced an unexpected 7% decline in manufacturing orders, marking the most significant drop in a year. This decline was primarily driven by a 13.2% decrease in domestic orders, while foreign orders fell by 2.3%. Key industries, such as machinery, automotive, and electronic equipment manufacturing, suffered declines, with electronic equipment being the only sector to exhibit positive momentum.
The struggling automotive and supplier industries continue to weigh heavily on the sector. However, VDW reports signs of resilience in aviation, medical technology, precision engineering, energy, shipbuilding, and armaments, which have recently secured significant orders. Additionally, business in services, components, repairs, maintenance, and conversions remains stronger than new machine sales. Despite these growth areas, global order volumes fell by 25% last year.
The French manufacturing sector experienced a slight decline of 1% in 2024, with a significant 25% drop in construction machinery due to a crisis in the building sector. The automotive sector’s struggles also impacted machine tool sales. However, there is moderate optimism due to potential recoveries in key industries such as aerospace, food processing, defense, and nuclear energy. Growth in certain sectors will be driven by aftermarket sales, components, and servicing rather than new equipment purchases.
French forecasts for 2025 indicate:
Industrial equipment: +1.6%
Construction machinery: -3.5%
Material handling equipment: +2.0%
Fluidic equipment: +1.3%
European defense spending rose by an average of 2.2% of GDP in 2024, with several countries significantly increasing their budgets. European NATO countries are shifting their defense priorities and focusing on three key areas: quickly replenishing stocks and supplies, improving equipment availability and mission readiness, and developing new capabilities to maintain a competitive edge.
Estonia and Latvia have committed to spending 5% of GDP on defense, while Poland plans to reach 4.7% by 2025. The EU has announced the ReArm Europe Plan, allocating $863.39 billion for defense investments, including $161.88 billion in loans for purchasing air defense, artillery, missiles, and cybersecurity enhancements.
A few recently announced projects and investment news items are listed below.
BAE Systems plans to invest $33 million in a new artillery facility in Sheffield, U.K.
Saab opened a new advanced manufacturing facility for radar systems and underwater robotics.
Rheinmetall will build a $325 million ammunition plant in Unterluess, with an annual production capacity of 200,000 artillery shells. It expects to create 500 new jobs.
Safran is investing $55 million in a new compressor blade manufacturing facility in Liege, Belgium.
Escribano Mechanical & Engineering plans to invest $11 million in a military vehicle manufacturing plant in Linares, Spain.
FMG plans to expand the capacity of its munitions plant in Vadollano, Spain.
The European Commission has approved $1 billion in German state aid for Infineon to build a new semiconductor manufacturing facility in Dresden. This initiative aligns with the European Chips Act, which aims to enhance technological self-sufficiency and competitiveness in semiconductor production.
For more information, please contact Conchi Aranguren at caranguren@AMTonline.org.
