IW study: Gloomy prospects for German companies

Status: 07/12/2022 08:26 a.m

Production declines and job cuts are becoming likely for more and more companies in Germany. According to a recent study by Cologne’s IW Institute, there will be no “job shock” despite the consequences of the Ukraine war.

The consequences of the Ukraine war are becoming more and more noticeable in German companies. In some sectors there is even a threat of a decline in economic output in the coming months, as a current study by the IW Institute shows. A good third of the around 2,300 companies surveyed (37 percent) still expect production to increase compared to 2021. However, a quarter of the companies expect production to decrease. The balance of positive and negative business expectations in June was only twelve percentage points. In spring it was still 15 percentage points in late autumn 2021 it was even 34 percentage points.

Corona catch-up effect is absent

A catch-up effect after the Corona crisis, which experts had actually expected, has thus fizzled out due to the consequences of the war in Ukraine. Companies are being held back by high energy prices, material bottlenecks and, in some cases, a lack of qualified employees. However, this potential is “more than wiped out” by the recent high inflation of seven to eight percent.

According to the study, a recession is particularly threatening in construction. Both in the industry, which is suffering from the delivery problems, and among the service providers, disillusionment is increasing. According to the study, the manufacturing industry is threatened with a year of stagnation. According to the survey, the service sector also has difficulties in finding suitable personnel for vacancies.

Employment outlook still positive

Nevertheless, the Cologne researchers do not expect any employment shock in the coming months. Because a third of the companies are assuming that they will have more staff in the current year, and only a fifth want to lay off employees.

On the other hand, there is a threat of a slowdown in investment activity in the German corporate landscape. Although the investment climate is still positive despite the high level of uncertainty as a result of the war, “it has cooled down considerably”. 36 percent of the companies are currently expecting higher investments than in 2021, but a quarter of the companies are expecting less spending here. The investment gap created by the corona pandemic will probably not be closed in the current year.

A few days ago, the Munich ifo Institute drew a similar picture of the German economy with its economic expectations. The mood clouded over noticeably in June due to concerns about the energy supply. The ifo business climate fell by 0.7 points to 92.3 points in a monthly comparison. Most recently, the index had risen twice in a row. Experts had expected a slowdown, but only with a slight minus.

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