DIHK Economic Survey Fall 2023: Uncertain framework conditions slow down German economy

Companies across all industries still view the current business situation somewhat positively: 30 percent (down from 34 percent) rate the current business as "good." However, the percentage of businesses rating their situation as "poor" has noticeably increased from 15 percent to 21 percent. The balance of the current situation assessment drops from 19 to just 9 points. This is significantly below the long-term average of 21 points. This downturn is affecting almost the entire economy and all company sizes.

Business expectations are significantly dimming. Over a third of companies (35 percent, up from 23 percent) expect their business to worsen in the next twelve months. Only one in eight (13 percent, down from 18 percent) anticipates better business. This results in a decline in business expectations from minus 5 to minus 22 points.

Risks and uncertainties continue to increase and become more diverse. On average, companies select more than three (3.1) out of a total of eight different business risks. Prior to the pandemic, the average was 2.4.

More than half cite energy and commodity prices as the biggest business risks (currently 61 percent, down from 65 percent in the early summer), labor shortages (58 percent, down from 62 percent), domestic demand (53 percent, up from 46 percent), and economic policy conditions (51 percent, up from 43 percent) as the most significant business risks. More than 5,800 companies provided free-text responses regarding economic policy conditions, and "bureaucracy" is by far the most frequently mentioned keyword. About 38 percent of the free-text responses include bureaucracy-related issues, compared to "only" 35 percent in the previous survey.

24 percent of companies (down from 28 percent) plan additional investments. Almost a third (31 percent, up from 24 percent) intend to reduce investments. The investment intentions balance declines from four to minus seven points.

Forecast: Given the overall gloomy outlook, the DIHK expects a 0.5 percent decline in economic output this year. In the following year, the DIHK anticipates economic stagnation (0.0 percent).