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Business expectations of German companies drop massively

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Business expectations in the German economy has taken a significant turn for the worse in the recent months. This is one of the results of the nationwide IHK economic survey for early summer, for which the DIHK evaluated the feedback from a total of more than 25,000 companies from all sectors and regions. According to the survey, one third of the companies expect business to become worse in the next twelve months, and only 19 percent expect an improvement.

"This is yet another sharp drop compared to the beginning of the year, when it was already shaping up to be a very difficult year for many," said DIHK CEO Martin Wansleben. "Even if Russia's war in Ukraine were hopefully to end soon, supply chain problems and high energy and raw material prices mean that we are hoping for a maximum of one to 1.5 percent growth this year. We can only achieve this meager result because we are still taking some economic recovery from the previous year with us and things are currently better again for the catering and tourism sectors."

Business expectations in the construction and industrial sectors have deteriorated particularly dramatically. In construction, 44 percent of companies expect business to deteriorate and only seven percent to improve. In industry, too, the ratio of pessimists (37 percent) to optimists (14 percent) in terms of their own business expectations is worse than average. "So far, we have only experienced such a collapse in sentiment in industry during the financial crisis and the first lockdown in 2020," Wansleben said. He added that it is a matter of concern that many companies are having to significantly reduce their investment plans again in view of the bleak business prospects and are having to cut back on product innovations in particular. Even personnel plans are more restrained. 

Industry and construction hit harder than average

Industry and construction have been hit particularly hard by the sharp rise in prices for energy and raw materials. But this business risk is also reaching a historically negative level in the economy as a whole. "We are seeing even higher values here than at the beginning of the year, when we had already determined risk values that were previously unknown," says Wansleben. Across all industries and regions, 78 percent of companies currently describe energy and raw material prices as one of their greatest business risks. In industry, the figure is as high as 93 percent, and in construction 91 percent. 

Industries that are suffering particularly from galloping energy prices or increasing supply chain problems are increasingly reporting financial difficulties. While retailers and tourism companies were more likely to struggle with financial difficulties at the height of the pandemic, more and more industrial companies and logistics companies are now being affected.

"We have to be careful that things don't start to slide here and we lose core industries," Wansleben said. In road haulage, the number of companies with financial problems has increased by ten percentage points compared to the beginning of the year to 52 percent, in the chemical industry it is 29 percent (up five percentage points), in the rubber and plastics industry 36 percent (up seven percentage points) and in metal production and processing 41 percent (up six percentage points). 

"Companies now expect fresh impetus from politics"

"Corona lockdowns, ongoing supply chain turmoil and now the aftermath of war: Many businesses are already experiencing their third crisis slump in a row," Wansleben said. "In the flood regions, it is even the fourth shock in less than three years. Even the companies that have come through smoothly so far are now expecting fresh impetus from politics. They feel burdened by additional bureaucracy and regulations that date back to the time before the crisis. Our entire economy needs relief and clear decisions from policymakers - especially in Brussels with a focus on the essentials. Because the challenges ahead are enormous, despite all the opportunities."

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Porträtfoto Dr. Jupp Zenzen
Jupp Zenzen Director Business Cycle and Growth, Business Surveys

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Picture Julia Fellinger, Press Officer
Julia Fellinger Spokeswoman