External factors of influence

Economic factors

NORMA Group is active in many different industries and regions. Seasonal and economic fluctuations in individual countries or industries can have an impact on customer demand and the order situation of NORMA Group. At the same time, NORMA Group is less vulnerable to temporary declines in demand in individual industries or countries thanks to its diversified product portfolio and broad customer base.

Global economy in 2024: continued diverse burdens, not revived despite interest rate turnaround

Global economic momentum remained moderate and regionally heterogeneous in 2024. The economic gap was particularly wide between the most important economic areas of the USA, China and Europe. The conditions for an economic upturn were good due to lower raw material and energy costs, diminishing inflationary pressure and the turnaround in interest rates initiated over the course of the year. However, the interest rate impetus came late – especially in the USA – and the geopolitical environment in particular caused great uncertainty. For example, Russia continued the war in Ukraine with the involvement of North Korea, and the conflict in the Middle East escalated. EU sceptics gained ground in the European elections and governments in key countries (France, Germany) were increasingly weakened. Towards the end of the year, the announcements made by Donald Trump, who won the US presidential election in November, triggered new uncertainties worldwide. In addition, more extreme weather events occurred in 2024 as a result of climate change. Despite all the pressures, the flow of goods remained intact in 2024. The Kiel Institute for the World Economy (IfW) and the International Monetary Fund (IMF) put global growth for 2024 at 3.2%, with momentum in the industrialized countries remaining subdued at just +1.7%. In contrast, the economic output of emerging and developing countries increased by 4.2%.

Despite expansive monetary and fiscal policy, there was no real economic recovery in China. The unresolved real estate crisis continued to dampen consumption. In addition, the high debt burden of various local governments weighed on the economy. Fixed asset investments and industrial production grew only modestly. However, China has significantly increased its output in the areas of mobility (cars, trains, airplanes), high-tech (computers, communication technology) and renewable energy (solar, wind). The other Southeast Asian economies, particularly the ASEAN-5 countries (+4.5%), grew somewhat faster than recently thanks to brisker global trade. India, the world’s most populous country, is catching up economically and growing very dynamically in structural terms. In 2024, the increase amounted to 6.5%. Important drivers here are population growth and urbanization.

In the US, the economy was experiencing a broad, strong upturn in 2024 (+2.8%) , stimulated by private consumption and expansive government spending. Investment activity was also brisk, both in equipment and in construction. In view of the dynamic domestic economy, the Fed maintained its tight monetary policy for a long time. It only lowered interest rates in three stages in the last four months of 2024, supported by easing inflationary pressure. However, industrial production was impacted by the weak global economy and was just below the previous year’s level for the whole year (-0.2%). Average capacity utilization fell from 79.0% to 77.6%.

European economy continued to stagnate in 2024

In Europe, the economy remained in poor shape in 2024 under pressure from global risks and weak export markets. The decline in the inflation rate had a stabilizing effect, although this was mainly due to falling energy prices. In June 2024, the European Central Bank (ECB) initiated a turnaround in interest rates. The ECB lowered the deposit rate from 4.00% to 3.00% in a total of four steps. The British and Swiss central banks also eased their monetary policy, and both countries experienced moderate economic growth. Domestic demand in the eurozone was driven by private and public consumption. In contrast, the industrial economy was weak with a decline in production output. Capacity utilization fell to an average of 76.9% in the final quarter of 2024 compared to 79.6% at the end of the previous year. Gross domestic product rose by just 0.7% in 2024, according to data from the Eurostat statistics office. Developments varied in the individual European countries: While France and Spain experienced robust growth, economic development in Italy, Sweden, Finland and Hungary was below average. Austria was in recession.

Germany’s economy stagnated again in 2024 – industry in crisis mode

Despite falling interest rates, the German economy again failed to develop any noticeable upward momentum in 2024 – for the fifth year in a row – and is in the longest period of stagnation since the Second World War. In addition to the weak economic tailwind, the industry is undergoing profound structural change due to the very high pressure to adapt. Digitalization, decarbonization, demographics and the global economy’s move away from previously highly interconnected production and supply relationships pose particularly significant challenges for the German economy. The industry is also suffering increasingly from competition from China and location-specific disadvantages in many areas. As a result, industrial production in Germany was in an above-average downward spiral in 2024. Capacities were underutilized in many cases. The situation continued to deteriorate steadily over the course of 2024. In the last quarter, the average occupancy rate was only 76.1%. At the end of 2023, this figure was 81.7% and at the end of 2022 it was 84.7%.

According to the Kiel Institute for the World Economy, uncertainty about the direction of economic policy and the break-up of the governing coalition also inhibited the willingness to invest and thus weighed on the consumer climate. According to the Federal Statistical Office (Destatis), the German economy shrank by 0.2% in 2024.

Exchange rate fluctuations

Due to its international activities, exchange rate fluctuations have an impact on NORMA Group’s business. RISK AND OPPORTUNITY REPORT

In fiscal year 2024, NORMA Group generated around 42% of its sales in US dollars. The development of the US dollar against the euro led to a negative effect on sales in fiscal year 2024. There were also further negative effects from the Chinese renminbi yuan.

Industry-specific influencing factors

Mechanical engineering 2024: global downturn with few exceptions, German manufacturers in crisis

The global industrial sector lacked noticeable impetus in 2024, meaning that the recovery remained subdued compared to the weak previous year. In the first eleven months, global industrial production (excluding construction) rose by 1.7% (2023: +1.0%, 2022: +2.9%). The growth came from the emerging markets. In the industrialized countries, however, production fell slightly. Overall, the willingness to invest remained low worldwide. However, China invested heavily in metal processing, energy supply and railroad infrastructure. The USA stimulated investment in selected key areas (semiconductors, e-vehicles, renewable energy) with comprehensive support programs. US equipment investments rose by 3.7% overall. However, the negative trend continued in the UK and the eurozone in 2024. Investments in machinery and equipment were down again.

After several years of lean times, the crisis in the traditionally very export-oriented German mechanical engineering sector intensified significantly once again. The VDMA (German Engineering Federation) assumes that the industry has now slipped into a broad-based downturn following last year’s global stagnation. According to the VDMA, global machine sales shrank by 2% in real terms in 2024. Only a few countries stood out positively: Real machine sales increased in India (+4%) as well as in China, Brazil and Taiwan (+2% in real terms in each case). In contrast, real sales of machinery and equipment fell in Japan (-2%), South Korea (-2%), the USA (-3%), Canada (-6%) and Turkey (-5%).

In Europe, the recession in the mechanical engineering sector was even more severe than in the previous year. According to the VDMA, machine sales shrank significantly by 6% in real terms in 2024 – both in the EU and in the eurozone and the UK. Switzerland was down 4%. Within the EU, mechanical engineering was on a downward trend in almost all countries. The exceptions were Spain (+0%) and Portugal (+2%). The decline in sales was very pronounced in Eastern Europe, parts of Scandinavia, Belgium (-7%) and Austria (-6%). Italy (-7%) and France (-5%) also recorded sharp declines. According to preliminary estimates by the VDMA, production in the mechanical engineering sector in Germany will fall by 8% in real terms in 2024 (2023: -1% in real terms).

Global automotive production declining, China is pushing into the global market with new energy vehicles

The profound upheaval in the automotive industry will continue to shape the sector’s development in 2024. Electric vehicles have become more established. According to data from S&P Global Mobility (S&P GM), 16.9 million new energy vehicles (NEVs) were produced worldwide in 2024. This was a strong increase of 16.6%. The combined global market share of battery electric vehicles (BEV) and plug-in hybrids (PHEV) rose to 19.1% (2023: 16.0%). China is the dominant player here, supported by high subsidies, with shares of 65.8% and 73.5% respectively of all BEVs and PHEVs produced worldwide, and has entered the global markets with a large number of suppliers and models. In 2024, the USA and the EU responded with protective tariffs on imports of Chinese e-vehicles. Including combustion engines, the entire global market grew only slightly in 2024 according to S&P GM. Sales rose by 1.7% to 88.2 million LVs (light vehicles up to 6 tons), with the upturn in North/South America and Europe being stronger than in Asia. Production trends, on the other hand, were contrary. Global production fell by 1.6% to 89.1 million LV. Output in the established regions of the USA (-1.4%), Japan/South Korea (-6.5%) and Europe (-5.2%) fell in 2024. In contrast, China (+3.0%), India (+3.5%) and Brazil (+7.8%) gained market share. The market for commercial vehicles (commercial vehicles, trucks + buses) declined in 2024 due to the economic situation. Global production fell by 5.0% to just over 3.4 million commercial vehicles.

The European automotive market came to a standstill in 2024. According to Global Data, 11.6 million vehicles were sold (+0.0%). The ACEA (Association des Constructeurs Européens d'Automobiles) puts sales in Europe (EU + EFTA + UK) at around 13.0 million cars (+0.9%) for 2024. Among the major individual markets, the UK (+2.6%) and Spain (+7.1%) stood out. Sales were down slightly in Germany (-1.0%) and Italy (-0.5%), and even more significantly in France (-3.2%). Across Europe, sales of petrol cars fell by 6.8% and diesel cars by 11.8%. The share of sales accounted for by traditional combustion engines therefore fell from 48% to 43%. Demand for purely electric cars also faltered as a result of reduced subsidies (BEV -1.3%). However, hybrid drives (PHEV and mild hybrids [MHEV]) continued to gain ground with a combined +14.3%. According to S&P GM data, production in Western Europe remained under significant pressure in 2024 (-8.6%), with manufacturers in Italy, France and the UK cutting their output by double digits. Accordingly, car production in Germany declined by 1.5% and, according to the industry association VDA, domestic car production stagnated at 4.1 million units.

Construction industry 2024: Residential construction in crisis, civil engineering stabilizes and provides impetus 

The construction industry in Asia is fundamentally driven by population growth and urbanization. Short-term factors can override this trend. India’s construction industry is growing on a stable path of 6% to 7% per year. China’s construction sector remained divided in two in 2024. On the one hand, the real estate crisis had a massive impact on building construction: Building construction shrank by 10.6% in nominal terms, residential construction by 10.5%. On the other hand, massive investments were made in industrial production facilities as well as in energy production, railroad infrastructure and water management.

Europe’s construction sector remained in a downturn in 2024. According to the industry network Euroconstruct ( a. o. ifo Institute), the main reasons for this were a still unattractive financing environment, high real estate prices and increased construction costs. At the same time, residential construction slipped into a pronounced crisis. 2024 was also challenging for commercial and public building construction, which was reflected in a decline in construction output. In turn, higher investment in transport and energy infrastructure supported civil engineering. On balance, construction output in its 19 core European markets shrank by 2.4% in real terms according to Euroconstruct 2024 data. Regionally, the losses were pronounced in Scandinavia, France, Austria and Eastern Europe. The construction sector has also slipped into recession in Italy, the Netherlands and the UK. In contrast, construction in Spain, Portugal and Ireland remained in positive territory. The Swiss construction industry even managed to reverse the trend with slight growth.

In Germany, the downward trend in the construction sector was even more pronounced. Construction investment in 2024 again shrank significantly by 3.5% in real terms (2023: -3.4%). According to the ifo Institute, residential construction in particular was burdened by high interest rates, a poor order situation and cancellations. Insolvencies in the construction industry rose by double digits. According to the German Institute for Economic Research (DIW), the total construction volume, which includes investments in existing buildings as well as new construction, fell at an accelerated rate of 3.7% in real terms in 2024 (2023: -2.0%). While public construction increased slightly (+1.5%), commercial construction slipped more sharply into negative territory than recently at -3.3%. Residential construction came under even greater pressure at -5.1%. At -10.1%, new residential construction fell even more sharply in 2024 (2023: -9.7%). In addition, investments in the housing stock for extensions and conversions, modernization and repairs also declined (-3.2%). In 2024, this typically more stabilizing segment accounted for 74.0% of the total construction volume in residential construction.

US construction industry 2024: unimpressed by the upswing; high investments in the water supply sector

In the USA, construction spending rose by 6.5% in nominal terms in 2024 (2023: +7.0%). Public construction activities were once again a key driver. Government investment in the energy and water supply was significantly increased. The latter grew by 23% in 2024. Private commercial construction also increased significantly. In addition, investments in production facilities (+20.3%) were driven by high government incentives, among other things. The commercial sector, which is a key growth market for NDS®, showed a 12% decline in construction projects, according to FMI Insights. Although the Fed was late in cutting interest rates, private residential construction returned to growth at +5.9%. However, trends within the segment developed unevenly. While the single-family home segment recovered from last year’s downward trend, multi-family homes came under noticeable pressure. According to analyses by the North American sector specialists from FMI Insights, the trend in new construction in particular diverged (single-family homes +6%, multi-family homes -7%). By contrast, expenditure on conversions, extensions and replacements (excluding repairs and modernization) increased (+9%). According to industry experts from the Harvard Center of Joint Housing Studies (Remodeling LIRA Index), spending on repair and renovation work, which is a key driver of sales of NDS products, fell by 1.6% in the 2024 fiscal year.