DIHK business survey: Business expectations of German companies slump massively - One third expect further downturn in the next twelve months - Risk assessments for energy and raw materials reach new highs.
Business expectations in the German economy have deteriorated massively. This is the result of an initial evaluation of the nationwide IHK business survey for early summer among more than 25,000 companies from all sectors and regions, the overall results of which the Association of German Chambers of Industry and Commerce (DIHK) will present next Tuesday (24 May 2022). According to the first evaluation, one third of the companies expect business to deteriorate in the next twelve months, only 19 per cent expect an improvement. "This is another sharp drop compared to the beginning of the year, when a very difficult year was already on the horizon for many," said DIHK Managing Director Martin Wansleben. "Even if Russia's war in Ukraine would hopefully end soon, supply chain problems and the high energy and raw material prices ensure that we hope for a maximum of one to 1.5 percent growth this year. We can only achieve this meagre result because we are still taking some economic recovery from the previous year with us, and the catering and tourism sectors are currently doing better again."
Business expectations in construction and industry have deteriorated particularly dramatically. In construction, 44 per cent of the companies expect worse and only seven per cent better business. In industry, too, the ratio of pessimists (37 per cent) to optimists (14 per cent) in relation to their own business expectations is worse than average. "So far, we have only experienced such a collapse in sentiment in industry during the financial crisis and the first lockdown in 2020," said Wansleben. It is also worrying that many companies are having to significantly reduce their investment plans again in view of the gloomy business outlook and are having to cut back on product innovations in particular. Even personnel plans are more restrained.
Industry and construction are particularly hard hit by the sharp rise in prices for energy and raw materials. But this business risk is also reaching a historically negative level in the economy as a whole. "We see even higher values here than at the beginning of the year, when we had already determined risk values that were not known before," says Wansleben. Across all sectors and regions, 78 percent of companies currently describe energy and raw material prices as one of their greatest business risks. In industry it is even 93 percent and in construction 91 percent.
Sectors that suffer particularly from galloping energy prices or increasing supply chain problems are reporting more financial difficulties. While in the peak phase of the pandemic it was rather retailers or tourism companies that had to struggle with financial difficulties, now more and more industrial companies and logistics companies are being affected. "We have to be careful that things don't start to slide here and we lose core industries," said Wansleben. In road freight transport, the number of companies with financial problems has increased by ten percentage points to 52 per cent compared to the beginning of the year, in the chemical industry it is 29 per cent (up five percentage points), in the rubber and plastics industry 36 per cent (up seven percentage points) and in metal production and processing it is 41 per cent (up six percentage points).
"Corona lockdowns, ongoing supply chain turmoil and now the aftermath of war: Many businesses are already experiencing their third crisis slump in a row," Wansleben said. "In the flood regions it is even the fourth shock in less than three years. Even the companies that have come through it smoothly so far are now expecting fresh impetus from politics. They feel burdened by additional bureaucracy and regulations that date back to the time before the crisis. Our entire economy needs relief and clear political decisions - especially in Brussels with a focus on the essentials. Because the challenges ahead are huge, despite all the opportunities."
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DIHK Business Survey 2022