The construction and trade sector is not benefiting from the current economic climate lull. According to the latest economic report from the Central Association of German Crafts (ZDH), the mood in businesses has actually worsened in the second quarter compared to the previous year.
The business climate index for the craft sector, which reflects the current situation and expectations of businesses, dropped by 13 points in the second quarter, reaching 102. This severe decline in sentiment was last recorded in the second quarter of the COVID-19 year, 2020. ZDH President Jörg Dittrich told the FAZ that this figure symbolizes an overall worrying situation in the craft industry. He expressed particular concern over the recent weakening of investment activities. Businesses are either unwilling to invest under current conditions or remain cautious due to major uncertainties.
Only 16 percent of craft businesses reported increasing their investments in the second quarter, while one-third of surveyed companies reported a decline. Moreover, most other indicators of sentiment trended negatively, affecting all sectors and trades within the craft industry. This negative sentiment contrasts sharply with the clear improvement seen at the top levels of other German corporations.
Meanwhile, the Ifo Business Climate Index, released on Tuesday by the Munich Ifo Institute that surveys around 9,000 executives, rose for the fourth consecutive month in August, increasing by 2.1 points to 88.8. This index is now above the level reached before the Iran war flared up at the end of February. Despite the latest rise in energy prices, Ifo CEO Clemens Fuest stated that the German economy is recovering.
However, the craft sector remains oblivious to this recovery. Both the assessment of the business situation and business expectations dropped significantly compared to the second quarter of 2025. The ZDH attributes these difficulties, among other factors, to rising energy and material prices. The demand for industrial inputs within the craft sector remains hesitant, growth in construction is slow to materialize, and private demand is muted due to the sluggish labor market development.
Looking ahead to the second half of 2026, craft businesses anticipate further economic downturns. The ZDH’s economic report emphasizes the critical need for the federal government to finalize numerous outstanding reform projects. The association represents the interests of approximately one million craft businesses employing nearly six million people across Germany.
