While the economy in Denmark is progressing, with most economists anticipating a soft landing this year, it’s a different story on the other side of the Fehmarn Belt. This is evidenced by the German Chamber of Commerce and Industry’s (DIHK) economic survey for early summer 2024.
More than 24,000 German companies participated in the survey. Overall, companies are less satisfied with the current situation than they were at the beginning of the year. Nearly a third rate it as good, while almost a quarter rate it as negative. The industry sector is particularly concerned, as they assess the situation more negatively than before.
Poor sentiment
Last week, DIHK’s Managing Director, Martin Wansleben, presented the survey results in Berlin:
– The current situation for companies is poor, especially in the industry sector. Expectations show no significant upward movement, said Wansleben.
DIHK’s sentiment index is below the average at 97.2, a slight improvement compared to the start of the year, but the majority of companies remain pessimistic.
Industry loosing momentum
Only 28 percent of the surveyed companies rate their business situation as positive, while 23 percent rate it as poor. This results in a further decline in the balance of the situation assessment from seven to five points. And this deterioration, according to Wansleben, “applies to almost the entire economy.”
It is particularly worrying that the German industry is still declining, as it has traditionally driven the entire German economy.
More cuts than investments
Only 24 percent of companies plan to increase their investments, while 31 percent plan to cut back. Such low investment willingness was last seen during the financial crisis and at the beginning of the 2000s.
– These are alarming signs of gradual deindustrialization, warned Wansleben.
Pressure on competitiveness
More than half of the companies cite domestic demand as a risk, while high energy and raw material prices, lack of qualified labor, and labor costs continue to pose structural risks. Uncertain economic-political conditions also pressure Germany’s competitiveness.
Can only hope for stagnation
According to Wansleben, clear signals are needed from both Berlin and Brussels to strengthen competitiveness. Broadband, wind power plants, and tax cuts are among the measures he believes are necessary. DIHK demands, among other things, an extension of the depreciation option, an investment premium, and an increase in the immediate depreciation limit for small assets to 5,000 euros.
Although the global economy is growing moderately, export expectations for German companies remain subdued.
– Exports are currently providing no positive impulses. Based on the results, DIHK predicts at most stagnation for this year, said Wansleben.
Read DIHK’s economic survey here (in German).
