An enormous effort is now needed to overcome the gloomy mood
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After two years of recession, there are still no signs of a sustainable recovery in the German economy. Although individual indicators in the new economic survey by the German Chamber of Commerce and Industry (DIHK) show slight improvements, the mood among companies remains predominantly poor.
The current DIHK sentiment index, which records the assessments of more than 23,000 companies from almost all sectors and regions, remains in the pessimistic range at 94.9 points.
Helena Melnikov
© DIHK / Vu Trang
Helena Melnikov, Chief Executive of the DIHK, warned at the presentation of the economic survey for early summer 2025 in Berlin: "None of our indicators are positive. The economic upturn that we all want and that our country needs is not yet in sight. The risks that companies are facing emphasise the urgent need for action in economic policy."
Despite a favourable first quarter due to pull-forward effects, the risk of a recession has unfortunately not been averted. The DIHK therefore continues to expect a slight overall decline in gross domestic product of 0.3 per cent in 2025.
"This reinforces our fear that economic output will fall for the third year in a row for the first time in Germany's post-war history. We must do everything we can to ensure that this is not a lost year," says Melnikov. The survey was conducted between the end of March and the end of April –i.e. before the new government took office. "The new federal government can now prove itself. The promised change of course in economic policy must now also reach the companies. So far, companies have not felt the effects. That's why positive impetus for the economy must come quickly –before the summer break –and companies are waiting for it."
The business risks show just how important these signals are. "Business confidence in politics is not a sure-fire success," warns Melnikov. In terms of risks, companies once again see the economic policy environment as their biggest obstacle at 59 per cent –a figure that peaked at 60 per cent at the beginning of the year. Other business risks include domestic demand (57 per cent) and labour costs (56 per cent, highest level ever). "High labour costs not only affect sectors with above-average salaries, such as industry, but also those with high staffing levels, such as the hospitality industry," says Melnikov. "Rising social security contributions and the statutory minimum wage and its consequences also play a role here." Energy and raw material prices are also exacerbating the situation. Among energy-intensive companies, 71 per cent say this is the case.
"Although companies' business expectations are brightening slightly, they remain pessimistic on balance," said Melnikov. The proportion of companies with a negative outlook for the future fell from 31 to 26 per cent, while the number of optimistic companies increased from 14 to 16 per cent.
In terms of the business situation, the mood is mixed. A quarter of businesses rate their situation as good, just as many as poor. "This is the worst assessment of the situation since the coronavirus pandemic. Uncertainty about the economic policy course caused companies to be cautious. This is compounded by a weak domestic economy, subdued demand from abroad and structural problems such as a shortage of skilled workers, rising labour costs and continued high energy and raw material prices," said the DIHK Chief Executive. A glimmer of hope remains: Manufacturing and the construction sector in particular are showing signs of recovery and could once again become driving forces for the German economy –provided that politicians do everything they can to strengthen Germany as a business location through structural reforms. In particular, planning and authorisation procedures need to be accelerated in all areas.
The latest DIHK survey shows that German companies' expectations for international business in the early summer of 2025 are deteriorating significantly. Helena Melnikov explains: "German industry is losing competitiveness internationally and is facing a difficult situation. US tariff policy in particular has put a severe damper on global trade and German export prospects."
In view of the uncertain overall situation, companies in Germany remain cautious in their investment plans. Almost one in three companies are planning to cut back on investments, while only just under a quarter intend to increase investments. Although the resulting balance of investment plans of minus seven points is a slight improvement on the level at the start of the year (minus ten points), it remains negative and is well below the long-term average (plus three points). "Companies' investments are not gaining momentum," says Melnikov. "Unless we see positive changes here, there will be no self-sustaining upturn. After all, almost 90 per cent of the 900 billion euros in annual investments in this country come from the private sector."
Against this backdrop, clear signals from politicians are all the more important. "We urgently need concrete measures to speed up procedures, reduce costs and forge international partnerships. By the summer break, for example, it would be possible to reduce the electricity tax to the European minimum level, introduce the one-in-two-out rule directly in order to combat bureaucracy concretely and effectively, implement the simplified amortisation retroactively and decide to halve the transmission grid fees. Only with a joint effort can we get out of this trough and achieve a turnaround. The new federal government now has it in its hands."
The full results of the survey can be downloaded here:
