Economic situation - German economy pessimistic about the coming year
A gloomy mood in the German economy: many major sectors are also pessimistic about the coming year. "It is rare that we see such weak momentum two years in a row. A year with a poor outlook is followed by another weak year," Michael Hüther, Director of the German Economic Institute (IW), told the German Press Agency. The weakness of the global economy, interest rate hikes and uncertainties regarding the federal budget are depressing the outlook for 2024, which is also likely to have consequences for the labor market. Last year, the energy crisis weighed on sentiment.
According to the IW 's annual survey, 23 out of 47 business associations surveyed expect a decline in production or business at their member companies in the coming year. Fifteen industry associations expect economic activity to remain the same, while only nine anticipate a higher level of production. A year earlier, 30 associations expected a decline and 13 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 2009, the year of the financial crisis," explained Hüther. In his view, the main problem is the lack of predictability for companies. The IW boss cites the abrupt end to state subsidies for electric cars as the most recent example. "We are no longer a reliable location in terms of 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 even another government will not be able to cope with the current concept."
According to the employer-oriented 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 apparent for a long time can no longer be seen in 2024," said Hüther. "We will no longer see a further increase in employment, partly due to the increasing shortage of skilled workers limiting the supply of labor."
According to the survey, only 5 associations expect an increase in employment in the coming year, while 23 industry representatives anticipate a decline, including banks and savings banks as well as the construction industry. 19 associations expect stable figures.
Real estate sector expects significantly worse business
The real estate industry, among others, expects a significantly worse business result in the coming year. High construction costs and increased interest rates for construction loans are dampening demand, and real estate prices have fallen. The construction industry and building trade expect business to be slightly 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, having felt the effects of consumers' reluctance to spend this year as a result of high inflation, among other things.
The few optimists who expect business to improve somewhat in 2024 include the automotive industry, research-based pharmaceutical companies, the skilled trades and tourism, which is benefiting from the return of people's desire to travel following the coronavirus pandemic.
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- The global economy's weakness, interest rate hikes, and federal budget uncertainties are contributing to the pessimistic outlook for Germany's economy in 2024, as stated by Michael Hüther, Director of the Institute of the German Economy (IW), to the German Press Agency based in Cologne.
- According to IW's annual survey, 23 out of 47 business associations anticipate a decline in production or business at their member companies in the coming year, while only 5 expect an increase.
- Michael Hüther expressed concern about the lack of predictability for companies due to unstable framework conditions, citing the abrupt end to electric car subsidies as a recent example.
- The German labor market's stability, which has been apparent for a long time, may no longer be seen in 2024, and the unemployment rate could rise slightly on average, according to the employer-oriented institute.
- The real estate sector, among others, expects a significantly worse business result in 2024 due to high construction costs, increased interest rates for construction loans, and falling real estate prices.
Source: www.stern.de
