The association, which represents thousands of companies with over a million workers and more than $200 billion (£156.40 billion) in annual revenue between them, has forecast 1 percent growth this year in output and exports.

Carl-Martin Welcker said emerging markets, Russia, India and Germany could lift German engineering production this year after a year of stagnation. China, the United States and Britain were sources of uncertainty, he said.

"If the currently prevailing good sentiment, which we can read in many early indicators, continues and proves itself, it could work out even better than we have forecast," he told a news conference at the Hannover Messe industrial fair.

But he said there was no guarantee, saying the VDMA was unsure how China would develop, warning that Brexit still had to make itself felt, and saying it was unclear what economic policies U.S. President Donald Trump would really pursue.

"All of European industry faces big challenges. Chinese rivals are becoming not only bigger but also more competitive, and our important and hitherto dependable trade partner the United States threatens to become unreliable," Welcker said.

(Reporting by Georgina Prodhan; Editing by Maria Sheahan)

Stocks treated in this article : Linde AG, Siemens AG, ThyssenKrupp AG