The brief period of economic recovery appears insufficient to propel the German economy into the new year, as the employment situation is projected to remain strained throughout 2027. According to a current economic survey conducted by the Institute of the German Economy (IW), which was reported by the “Rheinische Post”, almost a third of all businesses anticipate job reductions, while only one in six plans to significantly expand its workforce. Furthermore, 39% of companies indicated they intend to reduce investment.
While the business climate improved during 2026, the overall business expectations for 2027 turned negative, the study found. Nearly one-third of the surveyed companies anticipate a decline in production and overall business activity in 2027, contrasted by only 20% expecting growth.
The outlook for the construction sector is particularly pessimistic. Twenty-six percent of construction companies predict a downturn in 2027, and only 15% forecast growth. This slump is attributed to rising financing costs and escalating material prices, which are dampening demand for building services.
Michael Grömling, IW Head of Economics, commented that the current “hay fever of the economy” is set to subside again next year. He noted that German private companies have been experiencing the longest streak of negative expectations since 2005, concerning trends in production, employment, and investments. Grömling cautioned that Germany should not rely on external stimulus for improvement, stressing that the immediate priority is the implementation of planned reforms.
The IW drew its data from a survey of approximately 1,000 businesses conducted in October 2026.
