ifo Business Surveys: Further Results
In addition to our overall indices and the regularly published export expectations and employment barometer, we publish further results of the ifo Business Surveys - at the overall, sector or industry level. How do companies assess price developments? Are they worried about their existence? Is there a shortage of orders or materials? Especially in times of crisis, companies' assessments reveal a lot about future developments.
ifo Business Surveys: Further Results
Business Climate in the Retail Sector Deteriorates in June
The ifo Business Climate in Germany’s retail deteriorated in June, finds the latest ifo Institute surveys. The indicator fell to -19.5 points from -13.3* points in May. Retailers assessed their current business situation as poorer. Their expectations for the coming months have clouded over considerably. “Many retailers cannot be satisfied with how business trended in the first half of 2024,” says ifo expert Patrick Höppner. Although consumers’ disposable incomes have risen, these increases were saved instead of being spent on additional consumption.
Business Climate Index Rises in Germany’s Residential Construction
The business climate index in residential construction in Germany has risen significantly, but the majority of companies remain pessimistic. Its index managed to climb from -52.3 points to -46.4 points. Expectations and the situation improved at a very low level. “Housebuilders are hoping that the worst of the economic downturn is behind them,” says Klaus Wohlrabe, Head of Surveys at ifo. “But the road to recovery is still long.”
Increase in Short-Time Work Halted in German Manufacturing
German manufacturing companies responded to the economic slowdown in winter with significantly more short-time work. Although it is likely to remain high in the coming months, it is not expected to worsen any further. In the second quarter, 18.8% of manufacturing companies responded that they were planning to introduce short-time work in the next three months.
Football World Cups and European Championships Barely Improved Sentiment in the German Economy
Sentiment in the German economy has barely improved during World Cups and European Championships. “At the time of the 2006 World Cup in Germany, there was initially a sense of anticipation in the ifo economic surveys. In the 6 months before the World Cup, the probability of ‘better business’ in the coming months rose by 1.1%,” says Klaus Wohlrabe, Head of Surveys at ifo. “After the World Cup, German companies actually found their business situation slightly better, with the probability of ‘good’ increasing by 1.1%. During and after the World Cup, however, there were no more effects on expectations,” he adds. “We suspect something similar now for the European Championship.”
German Chemical Industry Confident Again for the First Time
The business climate in the chemical industry in Germany recovered in May and returned to positive territory again for the first time since March 2022. Its index rose to +5.8 points from -5.2* points in April. “Confidence is returning to the German chemical industry,” says industry expert Anna Wolf from the ifo Institute.
Sentiment in the German Automotive Cooling Down
The business climate in Germany’s automotive industry deteriorated in May. This indicator dropped to -8.6 points, down from -2.4 points* in April. “Backlash from China to the trade conflict over electric cars with the US and Europe could severely impact business for German automotive manufacturers,” says Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies.
Business Climate in German Retail Improves Slightly
The ifo Business Climate in Germany’s retail improved a little in May, finds the latest ifo Institute survey. The index rose to -13.3 points, up from -14.5 points in April. While this reflects slightly better business expectations, the outlook for retailers remains pessimistic. The indicator for assessments of the current business situation remained unchanged at -2.1 points. “The European Football Championship is unlikely to deliver any noticeable sales impetus for retail as a whole,” says ifo expert Patrick Höppner.
ifo Price Expectations Rise Slightly
The ifo price expectations rose a little to 16.2 points in May, up from 15.2 points* in April. In manufacturing and wholesale in particular, slightly more companies plan to raise their prices than in the previous month. In consumer-related industries, by contrast, price expectations declined. “This means inflation is likely to fall again in the coming months. In August, it should drop below 2 percent for the first time since March 2021,” says Timo Wollmershäuser, Head of Forecasts at ifo.
German Manufacturing Sees Threat to Its Competitiveness
The competitiveness of German manufacturing within the EU and on global markets has been deteriorating for two years. This is based on analyses of the monthly ifo survey. Companies have reported falling behind in terms of competitiveness within the EU since the third quarter of 2022. The situation is similar on the global markets (outside the EU), where this trend had begun in the first quarter of 2022. “It’s becoming more difficult for German manufacturers to compete,” says Klaus Wohlrabe, Head of Surveys at ifo.
Business Climate in Germany’s Chemical Industry Improved
The business climate in Germany’s chemical industry improved in April. The index rose to -6.0 points, up from -10.1 points* in March. Companies assessed their current business situation at -16.0 points, which is slightly better than in March (-18 points*). Business expectations have brightened considerably – the indicator rose to +4.6 points in April, up from -1.9 points* in March. “The chemical industry is somewhat more confident about the coming months,” says industry expert Anna Wolf from the ifo Institute.
Half of Germany’s Residential Construction Companies Are Short on Orders
Residential construction in Germany is experiencing an order shortage. More than half the companies (55.2%) in this industry reported a lack of orders in April. In March, the figure was 56.2%. “Housebuilders are looking for signs of hope,” says Klaus Wohlrabe, Head of Surveys at ifo, “but there’s no end to the crisis in sight.”
Lack of Orders Slows Down the German Economy
The order shortage in Germany has worsened and is an obstacle to the economy. In April, 39.5% of manufacturing companies reported a lack of orders, up from 36.9% in January. In the service sector, the proportion rose from 32.1% to 32.4%. “The lack of orders is hampering economic development in Germany,” says Klaus Wohlrabe, Head of Surveys at ifo. “Almost all industries are affected.”
Sentiment in the German Automotive Industry Improves
The business climate in Germany’s automotive industry brightened again in April. The index rose to -1.5 points, up from -5.3 points* in March. “Companies in Germany’s automotive industry rate their current business situation as slightly better, but more importantly, their outlook once again turned much less pessimistic than in March,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Business Climate in German Retail Improves Again
The ifo Business Climate in retail brightened further in April. The index rose to -14.5 points, up from -17.5 points in March. Assessments of the current business situation improved significantly. Retailers’ business expectations also became somewhat more optimistic, but remain largely cautious. “Consumer-related businesses are likely to support the overall economy in 2024,” says ifo expert Patrick Höppner.
ifo Price Expectations Rise Slightly
In Germany, slightly more companies than in the previous month intend to raise their prices in April. The ifo price expectations rose a little to 15.1 points in April, up from 14.3 points in March. “Inflation is unlikely to fall any further in the coming months and is set to remain at just over 2%,” says Sascha Möhrle, economic expert at the ifo Institute.
German Companies Plan to Cut Investment in 2024
Companies in Germany have revised their investment plans for the current year downward. The ifo investment expectations fell to -0.1 points in March, down from +1.2 points in November. “Global demand for capital goods and intermediate goods remains weak and uncertainties persist regarding economic policy. As a result, many companies are postponing their investment decisions,” says Lara Zarges, economic expert at the ifo Institute.
Business Climate in the German Chemical Industry Brightens
The business climate in Germany’s chemical industry improved in March. The index rose to -10.5 points, up from -15.5 points* in February. Business expectations improved sharply, with the indicator climbing to -2.9 points, up from -14.9 points in February. “Although the order situation in the chemical industry still leaves a lot to be desired, companies seem to have weathered the worst of the crisis,” says industry expert Anna Wolf from the ifo Institute.
Availability of Materials in Germany Approaching Pre-coronavirus Levels
German manufacturers hardly have to struggle with material shortages anymore. In March, 10.2% of the companies surveyed reported shortages, down from 14.6% in February. “The supply of raw materials and intermediate products has recently seen significant improvement,” says Klaus Wohlrabe, Head of Surveys at ifo. “The situation is now almost back to how it was before the coronavirus crisis.”
One in Five Residential Construction Companies in Germany Reports Cancellations
Cancellations in German residential construction have increased. Just under one in five companies (19.6%) reported canceled orders. In February, the figure was 17.7%. “The situation in residential construction remains tense,” says Klaus Wohlrabe, Head of Surveys at ifo. “There aren’t enough new orders to offset the cancellations.”
Business Climate in the German Automotive Industry on the Upswing
The business climate in Germany’s automotive industry brightened in March. The indicator rose to -5.8 points, up from -9.9 points* in February. “The German automotive industry seems to have finally emerged from its economic low in the second half of 2023 and is looking to the future with more confidence,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Inflation Continues to Decline in Germany
ifo price expectations in Germany fell to 14.3 points in March, down from 15.0 points in February. This is their lowest level since March 2021. “Inflation is still on the decline and should fall below 2% this summer. From a German perspective, there’s no reason why the ECB shouldn’t cut interest rates soon,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Business Climate in German Retail Improves Markedly Before Easter
The ifo Business Climate in retail brightened noticeably in March. The indicator for assessments of the current business situation rose to -7.3 points, up from -18.1 points* in February. There was a clear improvement in business expectations, too. “The pessimism that has been such a feature of recent times is receding. Business in the run-up to Easter has apparently brought a ray of hope for many retailers,” says ifo expert Patrick Höppner.
Germany’s Shortage of Skilled Workers Eases Slightly
The shortage of skilled workers among companies in Germany has eased somewhat. According to the survey, 36.3% of firms are currently suffering from a shortage of qualified workers, down from 38.7% in October 2023. A year ago, it was 43.6%. “The weakening economy is reducing demand for skilled workers in the short term,” says ifo expert Klaus Wohlrabe, “but the fundamental problem is here to stay.”
Business Climate in German Retail Remains Gloomy
The ifo Business Climate in Germany’s retail deteriorated in February for the third consecutive month, finds the latest ifo Institute survey. The indicator for assessments of the current business situation fell to -18 points, down from -15.2 points* in January. Expectations improved only slightly, with the indicator remaining at the low level of -36.7 points. “The economic environment remains very challenging for retailers,” says ifo expert Patrick Höppner. “Consumers are holding back on shopping, which is putting a strain on retailers’ businesses.”
Sentiment in German Residential Construction Reaches Another All-Time Low
The ifo Business Climate in residential construction has reached a new low. It fell to -61.9 points in February, down from -60.7 points in January. More than half of the construction companies surveyed are dissatisfied with the current situation. Expectations are also stuck at rock bottom. “At present there isn’t a single ray of hope on the horizon for residential construction,” says Klaus Wohlrabe, Head of Surveys at ifo. “Orders continue to be canceled. At the same time, building permits for apartments are in free fall.”
