VDMA Expects Weak Recovery for Germany's Engineering Sector

BERLIN (Reuters) - Germany's plant and equipment makers face a 2% decline in production in real terms this year as geopolitical disputes, U.S. trade tariffs and general uncertainty cloud prospects for a strong recovery, the VDMA association said on Monday.

Reiterating its earlier forecast, the engineering group also urged Germany's next government to undertake deep reforms, including tax cuts and slashing regulation, to overcome what it described as paralysis in Europe's biggest economy.

The BDI industry lobby echoed those calls in a statement marking the start of the Hannover Messe trade fair, but forecast a less severe decline in production of 0.5% this year.

"We still believe the production low point was hit in the first quarter and that a recovery is starting - hesitantly, not across the board and with weak momentum," said VDMA chief economist Ralph Wiechers on the first day of the fair.

Production in the sector slumped by 7.2% last year although that was slightly better than the 8% decline the VDMA had forecast. Capacity utilisation was only 78% in January due to a lack of new orders and depleted order backlogs, it said.

The sector employs around 1 million people in Germany and includes household German names such as Siemens and Thyssenkrupp.

(Reporting by Tom Kaeckenhoff and Christian Kraemer; Writing by Madeline Chambers and Rachel More)