IW survey among associations: gloomy view of the economy on 2023

The consequences of the Ukraine war are depressing the mood of German companies: 30 out of 50 industry associations expect business to be worse in 2023. Energy-intensive sectors are particularly gloomy about the future.

The mood among the business associations is “extraordinarily negative,” says Michael Hüther, director of the employer-oriented Institute of German Economics (IW). His institute surveyed almost 50 business associations. 30 of them expect that their business and production activity will be lower in the coming year than this year.

Great uncertainty due to the Ukraine war

A comparison with the association survey from last December shows how dramatically the mood has deteriorated. At that time, not a single association had expected a decline in business activity.

The euphoria at the time about the end of the Corona crisis has now turned into great uncertainty. The main reason for this is obvious. As a result of the Russian attack on Ukraine, energy has become much more expensive. The energy-intensive industry in particular is suffering, says IW director Hüther, and the “core of the German business model” is affected.

Construction industry weighed down, hospitality industry recovers

In the iron and steel industry as well as in the chemical industry, the outlook for the coming year is particularly negative. The construction industry is also one of the big losers. A year ago, the euphoria was particularly great there, but now rising costs and high interest rates on loans are leading to a decline in construction activity.

But there are also some bright spots. The hospitality industry and tourism are recovering from the tough Corona years, as is the trade fair industry. According to the survey results, the level of investment should remain stable in large parts of the economy. In addition, only a minority of trade associations expect employment in their sectors to fall.

Stable labor market “as an economic anchor”

IW Director Hüther attributes this to the shortage of skilled workers and workers: “It takes a lot of work to find new workers,” he says. Companies are therefore interested in keeping their employees.

The stable labor market should also support the economy as a whole, because people with an income from work are better able to consume. The labor market could thus become “an important economic anchor” in the coming year, write the IW researchers.