The German Chamber of Industry and Commerce (DIHK) expects the economy to slow down and at the same time to have high inflation in Germany this year. The association announced this on Monday based on a survey of around 21,000 companies from all sectors. The economy is therefore still on the spot: “There are still no signs of a broad upswing,” said chief executive officer Ilja Nothnagel in Berlin. In addition, due to the shortage of skilled workers and persistently high inflation, labor costs would become an ever-increasing business risk for the economy. In the DIHK survey, 53 percent of the companies name this as an important business risk.
Despite persistently high energy prices, rising interest rates and the war in Ukraine, companies proved to be remarkably resilient. However, the outlook for the next twelve months remains gloomy overall – especially since incoming orders on the demand side have decreased noticeably: “The DIHK is still assuming zero growth this year.” From the point of view of the economic lobby, a restrained increase in private consumer spending, which according to the forecast will only increase by 0.5 percent this year, should contribute to the meager development. In 2022, an increase of 4.3 percent was achieved.
There is criticism of the site conditions
The fact that, according to the DIHK, the inflation rate this year at six percent should still be well above the two percent target set by the European Central Bank for the euro zone, this should also contribute to consumers’ reluctance to buy. The DIHK even expects a drop of 1.8 percent in gross fixed capital formation in 2023, after a small plus of 0.4 percent in 2022: “Overall, we have to say that the German economy is lacking momentum,” explains economic expert Nothnagel. A strengthening of the local location conditions is necessary: ”We urgently need new impetus for private investments, but also for infrastructure development.”
As at the beginning of the year, 34 percent of the companies in the DIHK survey rate their situation as good. 51 percent rate their current business situation as satisfactory. 15 percent of the companies describe their situation as bad. The resulting balance of “good” and “bad” answers remained the same at 19 points and slightly below the long-term average of 21 points. Retail companies in particular are reporting a deterioration in the situation. Only a good quarter of retailers (26 percent after 30 percent previously) speak of good business, almost a fifth assess the current situation as bad (19 percent after 18 percent previously). According to an analysis by the DIHK, this shows the cautious consumer mood due to inflation, supply chain disruptions that have not yet been completely overcome and the cost pressure due to high purchase prices.