Companies persist in gloomy moods - Sector offers optimism for industry - Persisting Negative Mood Persists Across Multiple Businesses - Sector Maintains Optimism
German Economy Remains Pessimistic According to DIHK Survey
The latest survey from the German Chambers of Industry and Commerce (DIHK) shows a slight brightening of business expectations but an overall "pessimistic" outlook for the economy. 26 percent of companies expressed negative sentiment towards the future, down from 31 percent at the beginning of the year. The number of optimistic businesses rose by two percentage points to 16 percent.
A quarter of the surveyed companies rated the current situation as good, while an equal number deemed it poor. Helena Melnikov, DIHK president, explained that this is the worst assessment of the situation since the Corona pandemic, citing a weak domestic economy, dampened foreign demand, and structural issues as key factors.
However, Melnikov found hope in the industry and construction sectors, where signs of recovery are emerging. Both sectors could once again become driving forces of the economy. Yet, she called for clear signals from federal politics to enable this recovery. "The promised shift in economic policy must now also be felt in the businesses," Melnikov demanded. So far, companies have not noticed any changes.
The DIHK president also highlighted potential U.S. tariff increases as a threat to the German economy and pointed out that the expectations of German companies for foreign business have significantly deteriorated. While the frontloading effects due to impending tariffs had a positive impact on exports in the first quarter, the DIHK does not see this as averted recession risk. The chamber expects the economy to shrink by 0.3 percent this year.
For the study, around 23,000 businesses from almost all sectors and regions were surveyed between the end of March and the end of April. The new federal government was not yet in place at that time.
In regard to the broader economic context, official government and expert forecasts now project that Germany’s real GDP will stagnate in 2025. This marks a significant downgrade from earlier expectations of modest growth. The German economy faces potential headwinds, including weak export demand, global economic uncertainty, and the disruptive impact of US trade policies, including significant tariffs. Persistent skills shortages and the reluctance of many companies to invest are recurring themes.
Unemployment is expected to rise slightly, with projections of up to 3.6% unemployment in 2025, and notably, a forecast of 3 million unemployed this summer due to weaker labor market performance. Investment across the board, including in industry and construction, is expected to stagnate in 2025, largely due to tighter financing conditions, weak economic sentiment, and elevated uncertainty. Skills shortages remain a structural challenge, restraining growth potential, particularly in manufacturing and construction, where labor constraints limit output and expansion plans.
The imposition or threat of US tariffs is cited as a major drag on German exports, which are crucial for the country’s industrial sector. This external pressure, combined with weak foreign demand, is dampening recovery prospects.
While 2025 is expected to be a year of stagnation or mild contraction, 2026 forecasts suggest a modest rebound, contingent on domestic demand and investment recovery. Policy response is needed to address structural challenges and revitalize the economy.
The employment policy in EC countries might need to focus on strengthening domestic demand and investments, addressing skills shortages, and promoting resilience to external pressures like US tariffs, considering the projected stagnation of the German economy in 2025 and the forecasted rise in unemployment. The financial sector should also pay close attention to the business environment, as the continued pessimism among companies could affect their ability to invest and recover, particularly in the industry and construction sectors.
