Manuel Menkhoff

Almut Balleer, Sebastian Link, Manuel Menkhoff, Peter Zorn

Over the past 18 months, companies in Germany have reduced their planned investments by an average of 8.4% due to higher interest rates. This is a finding from the ifo Business Survey of December 2023, which has now been published in ifo Schnelldienst. “Companies are responding to higher interest rates by investing significantly less in energy efficiency and renewables. They are also reducing their research and development spending,” says ifo researcher Manuel Menkhoff.

German companies are passing on their higher purchase prices to their customers, but slowly and not in full. This is the finding of an ifo Institute survey, according to which companies have passed on just 34 percent of their purchase price increases over the past few months. They plan to raise this to 50 percent by April. “This is likely to lead to further inflationary pressure on consumer prices in the coming months,” says ifo researcher Manuel Menkhoff. The companies themselves report that weak demand, competitive pressure, and long-term contracts are holding them back from raising prices.

Since the outbreak of war in Ukraine, German companies are once again experiencing some uncertainty about how their sales will develop in the future. This is the finding of an analysis conducted by the ifo Institute. Compared to the shock caused by the pandemic, however, companies are experiencing only moderate uncertainty. “The war in Ukraine has not triggered the kind of uncertainty crisis we saw at the beginning of the Covid-19 pandemic so far. And how severely companies would be affected by a potential halt to the supply of Russian gas is not a factor here,” says ifo researcher Manuel Menkhoff, one of the study’s authors.

Poland, Italy, the Czech Republic, Germany, Spain, and Hungary could become the most sought-after destination countries for Ukrainian refugees in the EU, according to calculations by the ifo Institute.