German Firms Faced with Major Headwinds

German companies are currently facing a range of challenges and risks that are impacting their business operations, according to a survey by the DIHK Chambers of Commerce and Industry. The survey, conducted between September 11 and October 6, involved more than 24,000 companies. Here are the key findings:

Economic Policy Concerns: Over half (51%) of the surveyed companies expressed concerns about current economic policy and its impact on their own development. This suggests a need for swift and practical government action to address these issues.

Ongoing Economic Struggles: The German economy has been facing difficulties since the end of 2022, including structural and permanent challenges such as demographic changes, climate change, and high energy prices.

Expectations for the Future: The survey revealed that only 13% of companies anticipate an improvement in their business over the next 12 months, while 35% expect a deterioration. This lack of optimism is reflected in companies’ investment and employment plans.

Economic Contraction: The DIHK forecasts a 0.5% contraction in Germany’s gross domestic product (GDP) for 2023, and it is expected that the economy will stagnate in the following year.

Sector-Specific Pessimism: Pessimism is particularly prevalent in the trade sector, with 27% of companies expressing negative views.

Investment Restraint: The survey indicates a clear reluctance to invest, with only 24% of industrial companies planning to expand their investments in Germany, while 36% intend to reduce them.

Increasing Risks: Companies are dealing with rising risks and uncertainties. On average, companies now report experiencing more than three (3.1) business risks, compared to an average of 2.4 before the pandemic.

Key Concerns: In addition to economic policy concerns, companies cited worries about high energy and raw material prices (61%), a shortage of skilled workers (58%), and weak domestic demand (53%) as significant challenges.

These findings underscore the need for effective and timely government measures to address the economic challenges and uncertainties that German businesses are currently facing. The business outlook appears pessimistic, with many companies holding back on investments and expansion plans.