The German economy is also threatened with “economic shock” in the coming year. This is the result of a survey by the German Economic Institute. This has consequences for the labor market.
Many German companies do not expect any business recovery in the coming year. According to a survey conducted by the German Economic Institute (IW Cologne) among more than 2,200 companies, 35 percent of the companies surveyed are pessimistic about 2024. In contrast, only 23 percent of the companies surveyed had positive expectations for the coming year, according to the employer-related institute.
The global economy is losing momentum
Business expectations have fallen back to the level of autumn 2022, which was characterized by energy price shocks, high inflation and the risk of an energy shortage, the study says. The economic survey thus signals “a continuation of the economic paralysis in Germany”.
“The sharp increase in energy prices in the wake of the Russian invasion of Ukraine, the associated general increase in prices, the geopolitical uncertainties and the significant decline in the dynamics of the global economy explain the economic standstill in this country,” explained the researchers led by IW economics chief Michael Grömling.
Investments remain expected out of
According to the IW, the gloomy expectations are also likely to be reflected in the labor market. 35 percent of companies expect fewer employees in the coming year, while only one in five companies expect more. “This signals that the long-term increase in employment in Germany may have come to an end for the time being,” said the economic researchers.
The investment weakness will also continue in 2024. 36 percent of companies planned to invest less, while only 27 percent wanted to increase their budgets.
Stabilization among service providers?
German construction companies are particularly pessimistic about the coming year. 54 percent of the companies surveyed expect a decrease in production, only 13 percent expect an increase. 38 percent of industrial companies expect a decline in production in 2024, while 25 percent expect an increase.
In contrast, the business prospects of service providers are almost balanced: 26 percent expect better business, 27 percent expect worse business. The current consumption barometer from the German Trade Association (HDE) also points to a possible stabilization in the sector. According to the association, consumer sentiment is better than it has been for around a year. This means there is a chance that private consumption will stabilize by the end of this year.
The IW study suggests a slight north-south divide in economic prospects. Overall, business expectations in the southwest and Bavaria were often better than in the north. In contrast, “no noticeably different development in East and West Germany” could be determined, according to the IW.