Gloomy mood in the German economy: Many large industries are also looking to the coming year with pessimism. “It is rare that we see such weak dynamics two years in a row. A year with poor prospects is followed by another weak year,” said Michael Hüther, director of the German Economic Institute (IW), to the German Press Agency. The weakness of the global economy, interest rate increases and uncertainty about the federal budget are depressing the prospects for 2024. This is also likely to have consequences for the labor market. Last year, the energy crisis had a negative impact on the mood.
According to the IW’s annual survey, 23 of 47 business associations surveyed expect a decline in production or business among their member companies in the coming year. 15 industry associations assume that economic activity will remain the same, while only nine expect a higher level of production. A year earlier, 30 associations expected a decrease and 13 expected an increase.
No more reliable framework conditions
In the November/December survey, 22 associations stated that they expected investments to fall. “The last time the mood on this point was worse was in the year of the financial crisis in 2009,” explained Hüther. In his view, the main problem is the lack of planning for companies. The IW boss cites the abrupt end of state funding for electric cars as the most recent example. “We are no longer a reliable location given the conditions and there is no prospect of reliable framework conditions for the important transformation tasks of climate and demographic change by the end of the decade,” said Hüther.
According to Hüther, an important reason for this is the debt brake, “the design of which no longer fits the times. We urgently need a reform, because another government will not be able to cope with the current concept either.”
According to estimates by the employer-related institute, the unemployment rate could rise slightly to 6 percent on average in the coming year. “The stability on the German labor market that has been evident over a long period of time can no longer be seen with a view to 2024,” said Hüther. “We will no longer see any further increase in employment, also because of the shortage of skilled workers that is increasingly limiting the job supply.”
According to the survey, only 5 associations expect employment to increase in the coming year, while 23 industry representatives expect a decline, including banks and savings banks as well as construction. 19 associations assume stable numbers.
The real estate industry expects significantly worse business
The real estate industry, among others, is expecting a significantly worse business result in the coming year. High construction costs and increased interest rates for construction loans are dampening demand and property prices have fallen. The construction industry and construction industry are expecting business to be somewhat weaker than this year.
Important export-oriented industrial sectors such as mechanical engineering are suffering from the weakness of the global economy. The industry association VDMA recently lowered its forecast for 2024. The textile and fashion industry is also more pessimistic, as this year, among other things, felt consumers’ reluctance to buy as a result of high inflation.
The few optimists who expect slightly better business in 2024 include the auto industry, research-based pharmaceutical companies, trade and tourism, which is benefiting from the return of people’s desire to travel after the corona pandemic.
