A significant slowdown in business outlooks is emerging from Germany’s corporate leadership, according to a new survey by Deloitte. The poll, encompassing 171 Chief Financial Officers (CFOs) of German companies and reported by “Der Spiegel”, reveals a worrying stagnation in expectations for the coming year. The overall business outlook index stands at just under one percent, indicating a near-equilibrium between positive and negative sentiments, a stark contrast to previous periods of optimism.
The manufacturing sector is experiencing a particularly sharp downturn. The index value for this crucial industry has declined to -3 percent, fueled by anxieties within the machine building and automotive industries. Predictably, this gloom translates into planned workforce reductions, with three-quarters of companies in those sectors anticipating job cuts. This trend underscores a deeper structural issue, potentially linked to fluctuating global demand and the ongoing transition towards electric vehicle technologies – areas where German manufacturers face significant competitive pressures. Critics argue that the government’s industrial policy hasn’t adequately addressed these challenges, potentially exacerbating the slowdown.
In contrast, the service sector is presenting a comparatively brighter picture. With a positive outlook index of plus six percent, particularly strong growth is anticipated within technology and real estate firms, with projections of workforce expansion. However, the divergence between manufacturing and services raises concerns about a two-tiered economic recovery and potential social inequalities. The reliance on the service sector to sustain overall growth reveals a vulnerability if global economic headwinds intensify.
Investment planning shows a marginally improved index value of twelve percent, a slight rise from earlier in the year. However, this upswing is almost entirely driven by the dynamism within the service sector, reporting a substantial plus 28 percent. This masks a worrying trend: both the manufacturing sector and export-oriented industries are planning further investment reductions, with a startling one-third of machine building companies intending to scale back investment in the coming year. This underscores a lack of confidence in future export demand and potentially signals a reluctance to commit to long-term strategic projects amid economic uncertainty. Analysts suggest that persistent geopolitical instability and rising energy prices are key contributing factors to this investment hesitancy, placing further strain on the German economy’s industrial backbone.
