Unfavorable sentiment persists in numerous businesses; industry remains hopeful for change - Persisting Unhappiness Persists in Multiple Businesses - Sector Offers Optimism
DIHK Survey Shows Mixed Economic Outlook for German Companies
The German Chambers of Industry and Commerce (DIHK) revealed that business expectations have slightly improved in their spring survey, although they remain predominantly "pessimistic" overall. The survey involved feedback from 23,000 businesses in various sectors and regions.
Although 26% of companies expressed a negative outlook for the future, down from 31% at the start of the year, optimistic sentiments also increased, with 16% of businesses optimistic about their prospects, a two-percentage-point rise from the previous survey.
The current business situation was evaluated by a quarter of surveyed companies as good, while an equal number rated it as poor. DIHK CEO Melnikov noted this assessment as the worst since the Corona pandemic. Factors contributing to the subdued mood included a weak domestic economy, reduced foreign demand, and persistent issues such as labor shortages, increased labor costs, and high energy and raw material prices.
However, the DIHK anticipates signs of recovery in the industry and construction sectors, which could potentially re-energize the economy. To achieve this, Melnikov emphasized the need for clear signals from federal politics, specifically faster approval and planning processes, lower energy costs, and streamlined bureaucracy.
The DIHK remains concerned about potential U.S. tariff increases, which could pose a significant threat to Germany's economy. Melnikov expressed this concern on ZDF's "Morning Magazine." The survey indicates a decline in German companies' expectations for foreign business, particularly in light of anticipated tariff increases.
In the first quarter, there was a positive impact on exports due to front-loading effects resulting from the impending tariffs. However, the DIHK does not view this as an indicator of averted recession risk. Instead, they predict a 0.3% economic contraction this year, suggesting that for the first time since the post-war era, German economic output will decline for three consecutive years.
Enrichment data suggests that German companies worldwide, including German-British firms, display cautious optimism about their business situations and prospects in 2025. While many companies plan to increase investments and hire more workers, they face significant challenges, such as economic policy uncertainties, trade barriers, global and regional risks, and market dynamics. These factors could hinder business growth prospects.
The DIHK noted that various EC countries' policies, particularly in finance and employment, should be addressed to streamline bureaucracy and reduce labor costs for German businesses, as highlighted by DIHK CEO Melnikov.
In light of potential U.S. tariff increases and economic policy uncertainties, German companies worldwide are planning strategically, focusing on growth areas such as industry and construction, while also managing challenges in global business, such as trade barriers and market dynamics.
