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Crash of the German economy averted

However, DIHK economic survey does not show any relief
Lorries on Bridge

The German economy is only getting back on track very slowly

© Jorg Greuel / Stone / Getty Images

Germany's companies expect mostly stagnation and sideways movement in the current year. This is the result of the nationwide DIHK business survey of around 27,000 companies from all sectors and regions, presented by DIHK Managing Director Martin Wansleben in Berlin on February 9th.

Compared to the last DIHK business survey in autumn 2022, when only 8 percent of the respondents were optimistic – the lowest level ever recorded for business expectations – twice as many companies (16 percent) now expect better business in the next twelve months. However, the number of pessimists among the companies who expect worse business in the same period remains significantly higher at 30 percent (previously 52 percent). At minus 14 points, the balance of business expectations is still clearly in negative territory and thus far below the long-term average of (plus) 5 points.

"The good news is that the German economy was able to avert an impending crash," says DIHK Managing Director Martin Wansleben, assessing the results. "This certainly also has to do with the energy price brakes that have since been announced and put in place at the turn of the year. This has calmed some things down, but not yet revived anything. Instead of a deep recession, we can expect more of a sideways movement this year and a red zero at the bottom line."

On average, three out of four companies in all sectors still rate high energy and raw material prices as a business risk. In the industrial sector in particular, this figure remains very high at 85 percent. "For many companies, dealing with the enormous jump in prices last year was a fight for survival," says Wansleben. "Now they are able to plan better again, although at a much higher cost level. This puts pressure on margins and investment opportunities."

Thus, 27 percent of the companies plan to invest more in the coming twelve months – compared to autumn, this is a weak increase of 3 percentage points. However,  with 26 percent, almost as many want to reduce their investments in the same period. One-fifth of the companies also say they are postponing planned investments because of the cost burden.

Wansleben: "Only if investment picks up more strongly, a self-sustaining upswing can be achieved. In order for this to happen, the framework conditions must be right, especially in Germany and Europe. Currently,, investment in equipment has not even reached pre-crisis levels. This investment gap is causing us great concern." Companies that are currently investing are mainly trying to maintain the status quo. "Unfortunately, they have to put the brakes on expansion investments."

In this context, the DIHK chief executive also points out that just under one-fifth of the companies are complaining about a decline in equity capital. "This threatens financing difficulties, which in turn can restrict investment opportunities."  

More political tailwind needed

In addition to energy and raw material costs, more than half of the companies rate the persistent lack of skilled workers as well as the ultimately associated rising labour costs as a relevant business risk. "It is clear that in the search for new employees, companies are first and foremost challenged themselves," says Wansleben. "Employment intentions are then also quite expansive compared to the overall situation. However, the companies cannot cancel out the demographic development. That's why we need more political tailwind in recruiting skilled workers." The companies would also like to see this in many other areas.

"Unlike before, we received thousands of free-text responses. Even more often than the terms energy, inflation, war, lack of skilled workers or supply chain, the word bureaucracy is mentioned there," reports the DIHK CEO. "The message is clear: Germany and Europe must finally become faster. That's why it's good that things are moving so quickly with the LNG terminals. This must now become the 'German Standard', whether in infrastructure, administration or the expansion of renewable energies – and if companies want to invest."

Slight improvement in the business situation

The assessment of the current business situation shows a stabilisation. Due to the mild course of the crisis so far and the government support measures, fortunately, there was no slump, as was to be feared in autumn. Across all sectors, about one third of the companies (34 percent) assess their business situation at the beginning of the year as good. That is 2 percentage points higher than in the previous survey in autumn.

By contrast, the share of companies reporting a poor business situation fell slightly to 15 percent (previously 19 percent). The balance of good and poor assessments of the business situation thus improves from 13 to 19 points compared to autumn 2022. Manufacturing companies in particular can benefit from an easing in delivery traffic and work off the still high order backlogs. 36 percent of those firms assess the situation as good (compared to 33 percent in the autumn survey) and 15 percent as poor (autumn: 19 percent).

Energy and raw material prices remain the main risk

Due to the calming of prices on the energy markets, the high levels in the gas storage facilities and thus the absence of a gas shortage, the companies rate the risk of energy and raw material costs as somewhat less important. However, it clearly remains the main risk with 72 percent (autumn survey: 82 percent).

Even in the current crisis, the lack of skilled workers is the second biggest business risk from the point of view of the companies surveyed. Three out of five companies (60 percent) fear a shortage of staff. In the industrial sector, the lack of skilled workers reaches a new high of 61 percent. And other risks, such as labour costs (49 percent), domestic demand (48 percent) or the economic policy framework (41 percent), are also named by companies as business risks much more frequently than before the Corona pandemic.

Investment plans remain cautious

Companies' investment intentions remain cautious. Although there has been a slight improvement compared to the autumn survey, in particular fewer companies now want to cut back their investments (26 instead of 34 percent). Nevertheless, the still rather weak business outlook also affects investment plans. In addition, the budgets of many companies are still burdened by high energy, material, labour and recently also borrowing costs. One fifth of all companies have to postpone investments due to the high cost burden. Only slightly more companies (27 percent) than in autumn (24 percent) expect investments to increase in the coming twelve months.

The complete survey with all details can be downloaded here:

DIHK Economic Survey February 2023: "Companies fear stagflation" (PDF, 1 MB)



Porträtfoto Dr. Jupp Zenzen
Jupp Zenzen Director Economic Analysis, Business Surveys


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