DIHK: German economy is treading water

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German companies continue to rank energy and commodity prices as the greatest business risk. According to the DIHK, the shortage of skilled workers is increasingly coming to the fore.

Assembly line for wind turbines at Eno Energy in Rostock

The German Chamber of Industry and Commerce (DIHK) expects the economy to slow down and at the same time to have high inflation in Germany this year. The association announced this on Monday based on a survey of around 21,000 companies from all sectors. Energy and raw material prices continue to be rated as the greatest business risk. However, the shortage of skilled workers is increasingly coming to the fore. In view of these many hurdles, the economy continues to tread water: “There are still no signs of a broad upswing,” said Executive Board member Ilja Nothnagel on Monday in Berlin. Despite the persistently high energy prices, rising interest rates and the Ukraine war, the companies have shown themselves to be remarkably resilient, but the outlook for the next twelve months remains gloomy overall – especially since incoming orders on the demand side have decreased noticeably. “DIHK is leaving continue to anticipate zero growth this year.”

From the point of view of the economic lobby, a restrained increase in private consumer spending, which according to the forecast will only increase by 0.5 percent this year, should contribute to the hesitant development. In 2022, an increase of 4.3 percent was achieved. The fact that, according to the DIHK, the inflation rate this year at 6.0 percent should still be well above the target of 2.0 percent set by the European Central Bank for the euro zone should contribute to the consumer's reluctance to buy.

Reluctance to shop in view of inflation and other problems: shopping arcade in Hamburg

There is a dramatic shortage of skilled workers, especially in the service sector< /h2>

As at the beginning of the year, 34 percent of the companies in the DIHK survey rate their situation as good. 51 percent rate their current business situation as satisfactory. 15 percent of the companies describe their situation as bad. The resulting balance of “good” and “bad” answers remains the same at 19 points and slightly below the long-term average of 21 points.

62 percent indicated a shortage of skilled workers as a risk, according to the DIHK that was two percentage points more and thus a maximum value that had only been reached once in autumn 2018. In the service sector, a shortage of skilled workers was even named as the greatest risk. “In view of the aging of society, the lack of qualified workers will remain one of the main structural challenges for companies in the future,” explained Nothnagel.

Labor costs also became more of a focus for companies. 53 percent named this as a business risk, an increase of four percentage points since the beginning of the year. According to the survey, this was particularly true for sectors in which below-average wages are paid and which lost a lot of staff during the pandemic: for example for the catering trade with 73 percent or the taxi trade with 67 percent.

The business expectations would have brightened a bit, but were still very cautious, it said. The difference between good and bad expectations has increased from minus 14 points to minus five points – the long-term average was plus five. More companies are still pessimistic than optimistic. “The reason for the slight improvement is that energy prices have stabilized and even fallen recently,” explained Nothnagel. In addition, the supply bottlenecks decreased. He called for the location conditions to be strengthened through new impetus for private investment and infrastructure expansion. Planning processes would have to be accelerated. 

hb/iw (afp,rtr)