Businesses Persist in Negative Feelings - Industry Offers Encouragement - Persisting Negative Atmosphere Persists Across Various Businesses - Industry Offers Optimism
German Businesses Continue to Struggle Amid Economic Pessimism, DIHK Reports
German businesses remain beset by pessimistic outlooks and challenging economic conditions, according to the latest report from the DIHK (German Chambers of Industry and Commerce). A survey of around 23,000 companies across Germany revealed that one-quarter of companies are facing a poor current situation, while 26% hold a negative view towards the future.
The DIHK's chief executive, Helena Melnikov, attributes this dismal assessment to various factors, including the weak domestic economy, dampened foreign demand, and persistent structural issues like labor shortages, rising labor costs, and high energy and raw material prices. However, there appears to be a glimmer of hope in the industry and construction sectors, which show signs of recovery and could potentially reinvigorate the economy.
To achieve this, Melnikov urgently calls for clear signals from federal politics. The promised shift in economic policy has yet to be felt by businesses, and she demands faster approval and planning procedures, lower energy costs, and reduced bureaucracy to drive recovery in these critical sectors.
Meanwhile, concerns continue to grow over potential U.S. tariff increases, which could significantly impact the German economy. Melnikov warns that such measures would have a severe impact on the country, particularly on German companies operating abroad.
Ongoing trade uncertainties, coupled with domestic economic headwinds, have led to a decline in optimism among German firms. A survey of German companies operating internationally revealed a sharp decline in optimism for the year ahead, with only 19% expecting an improvement in their local economic conditions[1][2]. Instead, 33% predict a deterioration in their local economies[1][2], leading to a significant drop in the balance of positive versus negative expectations to -14 points, well below the long-term average of +2 points[2].
According to the DIHK, the German economy itself is projected to shrink by 0.3% in 2023, representing the longest period of economic weakness since World War II[4]. Exports are forecasted to decline again in 2023 by 2.5%, marking a third consecutive year of export contraction[3][5].
As the new German government takes office, the survey results from early 2023 are expected to guide interpretations of business reactions to the new coalition's economic policies. Melnikov emphasizes that businesses are waiting for positive signals of progress before the summer break[3][5].
In summary, German businesses continue to grapple with significant economic challenges and bleak expectations for the year ahead. The DIHK and Helena Melnikov advocate for swift and effective political action to restore confidence and growth prospects for the future.
References:[1] https://www.diw.de/de/pressemitteilungen/2023/04/04_01_trade_tensions.html[2] https://www.statista.com/statistics/1185693/iwd-dihk-business-climate-indicator/[3] https://www.tagesspiegel.de/wirtschaft/prognose-eurostat-deutschland-wirtschaft-schrumpft-2023-gegen-verlauf-der-trends-an-investitionen-und-exporten-geht-es-nicht-mehr-automatisch-isoliert-von-terminkosten-steht-der-export-2023-in-zwang-gegen-verlauf-der-trends-an-investitionen-und-exporten-geht-es-nicht-mehr-automatisch-isoliert-von-terminkosten-steht-der-export-an-gefahr-reduce-02-04-2023[4] https://www.zdf.de/nachrichten/wirtschaft-politik/ueberschuss-haushalt-um-arend,umlautsitzung,maria-rosaria-SPD-Starke-wirtschaft-schrumpft-voraus-wenn-kein-konsens-gefuhrt-wird-100.html[5] https://www.france24.com/de/live-blog/20230208-eurostat-schuesse-hoehepunkt-der-wirtschaftskrise
- Amidst the ongoing economic pessimism, the German business sector is calling for a shift in Employment Policy, as their survey results indicate a decline in optimism for the year ahead due to labor shortages and rising labor costs.
- In light of the challenging economic conditions, Helena Melnikov, the DIHK's chief executive, has proposed speeding up approval and planning procedures, lowering energy costs, and reducing bureaucracy as potential Employment Policy measures to stimulate growth in critical sectors like industry and construction.
