German electronics sector slows after record exports

Germany's electronics industry growth is expected to slow down after exports grew by a record 11 percent in the first six months of the year thanks to strong demand in China and the United States. "Speed and dynamics of growth will normalise in the second half," Andreas Gontermann, head economist of the German electronics industry association (ZVEI) told Reuters on Monday.
Gontermann said ZVEI was sticking to its target of 10 percent growth to surpass 180 billion euros ($258 billion) in sales this year. "We figured this was a conservative outlook when we published it in April and did think about increasing our outlook mid-year but decided against it due to the turbulence in the market," Gontermann said.
In addition, the United States' economy was not developing as hoped and there were first signs of softness in emerging markets. "In the past weeks and months indicators have been somewhat on the decline but they are still in an expansive mode," Gontermann said. For 2012, ZVEI said overall sales will grow at a more normal rate of around 5 percent, Gontermann said.
The German electronics industry is the second largest employer after the mechanical engineering sector with around 815,000 people employed by its members, which mainly include German mid-sized companies but also blue chips such as chipmaker Infineon and engineering group Siemens. Sales from exports in the first half were at 74 billion euros, ZVEI said. Exports to China rose 25 percent and shipments to the United States grew 21 percent compared with a year earlier.
Sales from imports rose 5 percent to 63 billion euros. Similar to other industries the electronics sector suffered from the financial crisis in 2009 but Gontermann said it bounced back surprisingly fast. "We estimated it would take around seven years to get back to the level of 2008," Gontermann said, adding that by the end of this year the sector will almost have reached that goal.
Investments however had not caught up as much. This year the volume of investments were likely to be about 5.5 billion euros compared with 7 billion euros in 2008. Looking ahead, Gontermann said the surge in demand for renewable energy thanks to Germany's exit from nuclear energy would surely benefit the electronics industry. "Long term growth could improve by one percentage point," Gontermann said, adding that Chinese rivals could likely improve their strong presence as well.