Germany’s vital Mittelstand, the backbone of its economy, is demonstrating worrying signs of weakness, according to newly released data from IT services provider Datev. The Mittelstandsindex, a closely watched indicator, reveals a 2.7% decline in sales in September, adjusted for price and seasonal factors, compared to the same period last year. This reversal signals the abrupt collapse of any perceived stabilization seen during the summer months, according to Datev’s chief economist, Timm Bönke.
The downturn is not uniform, with particularly acute drops observed in key sectors. The hospitality sector experienced a 4.5% sales decrease, followed by construction (down 2.9%) and manufacturing (down 2.8%). These figures paint a concerning picture of broad-based economic challenges facing Germany’s SMEs.
Crucially, the Mittelstand is currently failing to contribute positively to employment. September witnessed a 0.1% reduction in employment figures, raising concerns about a potential contraction in the labor market. This struggle to maintain jobs is intricately linked to a squeeze on profitability, as companies grapple with declining revenues and simultaneously face rising wage costs. September saw an average increase of 4.1% in wages and salaries within the Mittelstand, a deceleration in growth but still outpacing the most recent inflation rate of 2.4%.
Robert Mayr, CEO of the Datev cooperative, directly attributed the negative performance to a “policy standstill” (Reformstau), suggesting a lack of necessary structural reforms is eroding the fundamental strength of the German economy. This comment implicitly criticizes the current government’s approach, highlighting a perceived inertia preventing necessary adjustments to address long-term economic competitiveness and burden businesses.
The Datev Mittelstandsindex derives its insights from anonymized preliminary tax returns and other data from over one million SMEs, providing a near real-time perspective on economic activity considerably faster than official statistics. This rapid data stream underscores the urgency of the situation and demands a pragmatic reassessment of policy measures to support Germany’s critical Mittelstand sector. The declining performance raises broader questions about the resilience of the German economy and its capacity to weather current global challenges.
