Persistent Negative Atmosphere Prevails in Several Businesses - Sector Offers Optimism - Persistent Unhappiness Persists Across Multiple Businesses - Industry Offers Optimism
Germany's economic landscape remains pessimistic, according to the DIHK's spring survey, with a quarter of companies evaluating the current situation as poor. Despite a modest improvement in business expectations, almost a quarter of companies are still wary about the future, while only 16% are optimistic.
The weak domestic economy, dampened foreign demand, and structural issues such as labor shortages, rising labor costs, and high energy and raw material prices have all contributed to this lingering pessimism. However, the DIHK detects signs of recovery in the industry and construction sectors, which could potentially revitalize the economy.
Industry sectors could once again serve as driving forces for the economy, but the DIHK stresses that clear signals from federal politics are essential. The promised shift in economic policy needs to be felt by companies, Melnikov said, advocating for faster approval and planning procedures, lower energy costs, and streamlined bureaucracy.
The DIHK also highlights the potential threat to the German economy from potential U.S. tariff increases, which could have a significant impact on German companies. Meanwhile, foreign business expectations for German companies have significantly declined in the spring survey.
In the first quarter, the frontloading effects due to impending tariffs had a positive impact on exports. However, the DIHK does not view this as an averted recession risk, expecting the economy to shrink by 0.3% this year. This marks the first time, since the COVID-19 pandemic, that the economy could contract for the third consecutive year.
The DIHK surveyed around 23,000 businesses from various sectors and regions between late March and late April, before the new federal government took office. The survey results reveal several key economic challenges for German companies, including the deterioration of economic expectations abroad, the impact of U.S. trade policy, and global geopolitical upheaval.
To navigate these challenges and encourage growth, the DIHK suggests implementing structural reforms, such as lowering energy costs and reducing bureaucracy, and forming more reliable and resilient trade frameworks worldwide. German companies abroad, such as those in Vietnam and the Philippines, have demonstrated resilience and adaptability to global shifts and new tariffs. The government's focus on ensuring stable energy supplies, which might lower costs for businesses and support economic stability, is also noteworthy.
The DIHK emphasizes the need for clear signals from federal politics regarding economic policy, with faster approval and planning processes, lower energy costs, and streamlined bureaucracy being critical for industry sectors to once again drive economic growth. A potential threat to the German economy is the potential U.S. tariff increases, which could significantly impact German companies, especially given the decline in foreign business expectations for German firms as highlighted in the spring survey.
