The high price of energy and materials is still weighing enormously on the mood of German companies. According to a survey by the German economic institute IW Cologne (Cologne; www.iwkoeln.de), 39% of the 2,500 German companies polled said they expect their business to decline in the current year, with 35% predicting stagnation and only 26% forecasting improvement.

“Germany is facing a recession,” said Michael Grömling, the head of macroeconomics at the institute.

The building industry is above all in the doldrums. According to institute, a serious economic downswing threatens the sector. Half of companies in the industry said they anticipate falling sales, which is a hefty 20 percentage points more than in the survey from the past summer. Only 15% of the companies in the construction industry reported growth expectations.

The mood is also subdued in the industrial sector: the proportion of pessimistically inclined companies hit 39%, and only 28% expressed confidence about the current year.

Related: European growth expectations vary

The service sector offered a mixed picture. Retailers in most cases fear a bad year, but IT and media expect full order books. Overall, the companies in the service sector more or less balance each other out, with 29% positive forecasts versus 32% negative.