The poor sentiment among companies is solidifying

"The international business is not going as badly as feared," commented DIHK Managing Director Martin Wansleben on the results presented on February 15th in Berlin. "Some companies, particularly active in international business, are even showing some faint glimmers of hope."

However, the DIHK is deeply concerned that the overall negative sentiment in the German economy is solidifying. Wansleben stated, "It is alarming that almost three out of five companies now see business risks in the economic policy framework. This is a worrisome record high in our surveys."

Current situation and expectations remain gloomy

When evaluating the current business situation, 29 percent of companies describe their situation as "good" and 22 percent as "bad." The trend continues to decline steadily. The business situation balance, the difference between positive and negative assessments, deteriorates again from 9 to 7 points.

Overall, business expectations remain bleak. More than a third of companies, 35 percent, anticipate a deterioration in the next twelve months, while only 14 percent expect improvement. The balance of business expectations remains almost constant at a low level, increasing minimally by 1 point to minus 21 points.

Contrary to this gloomy outlook, companies benefiting from international business are performing somewhat better. For these predominantly larger companies, the business situation improves from a balance of 16 to 23 points, and expectations improve from minus 7 to 0 points. While it's a typical pattern for internationally active businesses to have better assessments, the gap between international and predominantly national business is particularly evident at the current juncture. However, it is also evident that economic policy risks are greatest for large companies.

"Despite this isolated glimmer of hope, overall expectations of companies remain deeply negative," reported Martin Wansleben. "All in all, the prospects for the German economy are bleak. Therefore, the DIHK predicts a further decline in economic performance of 0.5 percent for the year 2024." After the structural crisis in the early 2000s, it would be the second time in post-war history that economic performance declines in two consecutive years. "This is a clear warning signal that Germany and Europe must take seriously," according to the assessment of the DIHK Managing Director.

Business risks everywhere

"The structural problems continue to burden the economy," he continued. This is also reflected in the companies' responses regarding their greatest business risks. In many areas, the pressure of problems is growing; hence, the business risks reported by the companies remain at a high level. More than half of the companies mention energy and raw material prices (60 percent, after 61 percent in the fall of 2023), a shortage of skilled workers (56 percent, after 58 percent), domestic demand (55 percent, after 53 percent), and labor costs (consistent at 53 percent).

Particularly alarming is that 57 percent of companies cite economic policy framework conditions as a business risk (compared to 51 percent in the fall of 2023 and 43 percent in early summer). "In the over 7,500 free-text responses on economic policy framework conditions, companies express great concern – if not frustration – about the growing bureaucracy, excessive regulation, and the lack of economic policy impulses," Wansleben reported. "This is an area where we must continue to focus in our country. German companies must regain their competitiveness, especially in terms of investments. Only if competitiveness rises again can companies invest here at home."

Poor conditions and corporate frustration also weigh down investment plans domestically. 33 percent of companies plan to reduce their investments in Germany, and only 24 percent plan an increase. Thus, the negative trend in investment intentions continues after a brief recovery in the summer of 2023. "Equipment investments in Germany are still below the level of 2019," Wansleben pointed out. "To master major challenges such as climate, structure, demographics, and digitization, we need more private investments in Germany."

A strong signal for economic renewal is necessary

"With a strong signal for renewal and long-term reliable, business-friendly conditions, politics can and must rebuild more trust and create confidence for a successful transformation among companies," said Martin Wansleben. The survey once again demonstrates the importance of strengthening international business.

"We urgently recommend that, at the European level, the opportunity to fundamentally revise the Supply Chain Due Diligence Act towards less bureaucracy and more legal certainty be seized," clarified the DIHK Managing Director. "Such a fundamental revision is also necessary for the German Supply Chain Due Diligence Act. Additionally, we urgently need lower energy costs in Germany and a Growth Opportunities Act that truly deserves its name."

The complete survey with all details can be downloaded here:

DIHK Economic Survey February 2024:The poor sentiment among companies is solidifying (PDF, 858 KB)