Subdued economic climate in Germany - Hope for rapid recovery fading

The mood in the German economy is subdued, and a swift economic recovery currently seems out of sight. This is evident from a recent economic survey conducted by the German Chamber of Industry and Commerce (DIHK), the results of which were presented in Berlin. The tenor: The economy is not sliding, but a robust upswing is not forthcoming. According to a recent survey, only 30 percent of companies rate their current business situation as positive, while a quarter view it as negative. High energy and personnel costs, a lack of skilled workers, and excessive bureaucracy continue to pose ongoing burdens on the economy; moreover, the comparatively high tax burden in Germany is named as a structural problem. Nevertheless, a slightly positive trend regarding business expectations is discernible, although negative forecasts predominate. The hope that foreign business or a rising domestic demand could act as economic drivers has not yet been realized. Investments are on the agenda for only a quarter of companies, which, according to DIHK Managing Director Martin Wansleben, indicates a "creeping deindustrialization." Consequently, the forecast for economic growth predicts at best a stagnation, aligning with the expectations of the federal government and economic institutes which also anticipate minimal growth. In the industry sector, the situation assessment has further deteriorated, with persistently low new orders and continued high to rising costs in various areas. Additionally, consumer restraint particularly affects the production of consumer goods, and the trade sector is also impacted by the subdued demand. However, in the construction industry, the situation has somewhat relaxed due to falling material prices. Meanwhile, there are differences between the economic associations and Chancellor Olaf Scholz. While Scholz points to positive developments, such as the decreasing inflation, Wansleben emphasizes that glossing over the situation does not help. He calls for visible measures from the federal government, especially during the 2025 budget negotiations. The DIHK appeals for tax relief and the complete elimination of the solidarity surcharge to stimulate investments - a request shared by the FDP but controversial within the coalition. FDP economic spokesperson Reinhard Houben also advocates for bureaucracy reduction and calls for restrictions on new debts. The economy could additionally be burdened by an escalation of the trade dispute with China, particularly after the imposition of special tariffs by US President Joe Biden on Chinese electric car imports. The EU is meanwhile examining market distortions by China in the e-car sector and considering appropriate retaliatory tariffs. Wansleben warns of the significance of the German export economy against tariffs and the “highly dangerous” political consequences that could result.