Apparently, things were not as bad as feared because Germany has been able to avoid a sharp economic downturn, according to Martin Wansleben, CEO of the German chambers of commerce and industry DIHK (Berlin; www.dihk.de).

The results of the most recent nationwide survey conducted by the chamber said most companies expect stagnation and sideways movement for the current year. But Wansleben warned against premature rejoicing, saying it is still too early to sound the all-clear, and that a self-sustaining upswing can only set in with further investment. He added that, for this to happen, the conditions would have to be right, especially in Germany and Europe.

The poll results followed improvements in business activity indicators for Germany and the Eurozone, and upwardly revised growth forecasts for both economies (PIE 26.01.2023).

The DIHK’s latest outlook for smoother economic developments are fuelled by the business expectations of the 27,000 companies that participated in the business survey. There, unlike in the previous survey from autumn 2022, the majority of respondents said they no longer expect business to deteriorate, with the share of such pessimists falling to 30% from 52%. At the same time, the proportion of optimists doubled to 16%. In other words, while scepticism still prevails on the market, it is no longer as extreme as in autumn.

Wansleben said companies are somewhat more confident about the future in part due Germany’s recently announced government limits on energy prices. Across sectors, 72% of German companies still rated high energy and commodity prices as a business risk – with industry leading the field at 85%. “For many businesses, dealing with the enormous jump in prices last year was a fight for survival,” Wansleben explained. “Now they are better able to plan again, albeit at a much higher cost level.”

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As a result, the willingness to invest is edging higher again. For example, 27% of businesses – a rise of three percentage points over the autumn survey – said they want to spend more money in the coming 12 months. Although almost as many (26%) want to reduce investments, this proportion is significantly lower than in autumn (34%).

Nevertheless, every fifth company plans to postpone investments due to the cost burden. One obvious obstacle is a decline in company capital, something which many firms have complained about. “This investment gap is of great concern to us,” Wansleben warned. “Currently, equipment investment has not even reached pre-crisis levels.”

The shortage of skilled workers is also still causing problems. Three out of five companies said insufficient availability of suitable staff is a relevant business risk, and almost half of the companies also noted a resulting increase in labour costs.

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Overall, however, the current business situation was also rated as slightly improved. Across all sectors, just over one-third of companies assessed their business situation at the beginning of the year as good, which was two percentage points more than in the previous survey in the autumn.

On the other side of the equation, the share of companies reporting a poor business situation fell slightly to 15% from 19%. Industrial companies in particular may be able to benefit from reduced tensions in delivery traffic and work through their high order backlogs. According to the poll, 36% of industrial enterprises assessed the situation as good (three percentage points more than in autumn) and 15% as poor (down from 19%).