ifo Business Surveys: Further Results
In addition to our overall indices and the regularly published export expectations and employment barometer, we publish further results of the ifo Business Surveys - at the overall, sector or industry level. How do companies assess price developments? Are they worried about their existence? Is there a shortage of orders or materials? Especially in times of crisis, companies' assessments reveal a lot about future developments.
ifo Business Surveys: Further Results
Sentiment in the German Automotive Industry Improves
The business climate in Germany’s automotive industry brightened again in April. The index rose to -1.5 points, up from -5.3 points* in March. “Companies in Germany’s automotive industry rate their current business situation as slightly better, but more importantly, their outlook once again turned much less pessimistic than in March,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Business Climate in German Retail Improves Again
The ifo Business Climate in retail brightened further in April. The index rose to -14.5 points, up from -17.5 points in March. Assessments of the current business situation improved significantly. Retailers’ business expectations also became somewhat more optimistic, but remain largely cautious. “Consumer-related businesses are likely to support the overall economy in 2024,” says ifo expert Patrick Höppner.
ifo Price Expectations Rise Slightly
In Germany, slightly more companies than in the previous month intend to raise their prices in April. The ifo price expectations rose a little to 15.1 points in April, up from 14.3 points in March. “Inflation is unlikely to fall any further in the coming months and is set to remain at just over 2%,” says Sascha Möhrle, economic expert at the ifo Institute.
German Companies Plan to Cut Investment in 2024
Companies in Germany have revised their investment plans for the current year downward. The ifo investment expectations fell to -0.1 points in March, down from +1.2 points in November. “Global demand for capital goods and intermediate goods remains weak and uncertainties persist regarding economic policy. As a result, many companies are postponing their investment decisions,” says Lara Zarges, economic expert at the ifo Institute.
Business Climate in the German Chemical Industry Brightens
The business climate in Germany’s chemical industry improved in March. The index rose to -10.5 points, up from -15.5 points* in February. Business expectations improved sharply, with the indicator climbing to -2.9 points, up from -14.9 points in February. “Although the order situation in the chemical industry still leaves a lot to be desired, companies seem to have weathered the worst of the crisis,” says industry expert Anna Wolf from the ifo Institute.
Availability of Materials in Germany Approaching Pre-coronavirus Levels
German manufacturers hardly have to struggle with material shortages anymore. In March, 10.2% of the companies surveyed reported shortages, down from 14.6% in February. “The supply of raw materials and intermediate products has recently seen significant improvement,” says Klaus Wohlrabe, Head of Surveys at ifo. “The situation is now almost back to how it was before the coronavirus crisis.”
One in Five Residential Construction Companies in Germany Reports Cancellations
Cancellations in German residential construction have increased. Just under one in five companies (19.6%) reported canceled orders. In February, the figure was 17.7%. “The situation in residential construction remains tense,” says Klaus Wohlrabe, Head of Surveys at ifo. “There aren’t enough new orders to offset the cancellations.”
Business Climate in the German Automotive Industry on the Upswing
The business climate in Germany’s automotive industry brightened in March. The indicator rose to -5.8 points, up from -9.9 points* in February. “The German automotive industry seems to have finally emerged from its economic low in the second half of 2023 and is looking to the future with more confidence,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Inflation Continues to Decline in Germany
ifo price expectations in Germany fell to 14.3 points in March, down from 15.0 points in February. This is their lowest level since March 2021. “Inflation is still on the decline and should fall below 2% this summer. From a German perspective, there’s no reason why the ECB shouldn’t cut interest rates soon,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Business Climate in German Retail Improves Markedly Before Easter
The ifo Business Climate in retail brightened noticeably in March. The indicator for assessments of the current business situation rose to -7.3 points, up from -18.1 points* in February. There was a clear improvement in business expectations, too. “The pessimism that has been such a feature of recent times is receding. Business in the run-up to Easter has apparently brought a ray of hope for many retailers,” says ifo expert Patrick Höppner.
Germany’s Shortage of Skilled Workers Eases Slightly
The shortage of skilled workers among companies in Germany has eased somewhat. According to the survey, 36.3% of firms are currently suffering from a shortage of qualified workers, down from 38.7% in October 2023. A year ago, it was 43.6%. “The weakening economy is reducing demand for skilled workers in the short term,” says ifo expert Klaus Wohlrabe, “but the fundamental problem is here to stay.”
Business Climate in German Retail Remains Gloomy
The ifo Business Climate in Germany’s retail deteriorated in February for the third consecutive month, finds the latest ifo Institute survey. The indicator for assessments of the current business situation fell to -18 points, down from -15.2 points* in January. Expectations improved only slightly, with the indicator remaining at the low level of -36.7 points. “The economic environment remains very challenging for retailers,” says ifo expert Patrick Höppner. “Consumers are holding back on shopping, which is putting a strain on retailers’ businesses.”
Sentiment in German Residential Construction Reaches Another All-Time Low
The ifo Business Climate in residential construction has reached a new low. It fell to -61.9 points in February, down from -60.7 points in January. More than half of the construction companies surveyed are dissatisfied with the current situation. Expectations are also stuck at rock bottom. “At present there isn’t a single ray of hope on the horizon for residential construction,” says Klaus Wohlrabe, Head of Surveys at ifo. “Orders continue to be canceled. At the same time, building permits for apartments are in free fall.”
Business Climate in Germany’s Chemical Industry Improves Slightly
In February, the business climate in the German chemical industry brightened a little. The indicator rose to -15.7 points, up from -16.1 points* in January, due to better assessments of the current business situation. Expectations, however, turned somewhat more pessimistic again. “The climate in the German chemical industry is still rough, but there have also been some surprising rays of hope,” says industry expert Anna Wolf of the ifo Institute.
Working from Home Firmly Established in Germany
In February, 24.1% of employees in Germany worked from home at least part of the time. This is the finding of an ifo Institute survey of just under 9,000 companies. “The proportion has remained almost constant for two years,” says ifo expert Jean-Victor Alipour. “Regardless of the debates at individual companies about returning to the office, working from home has become firmly established in Germany.”
A Small Dent in the German Automotive Industry’s Business Climate
The business climate in Germany’s automotive industry deteriorated slightly in February after a noticeable brightening in January, according to the ifo Business Survey. “However, with a value of -10.1 points, the industry index is still well above where it was when it bottomed out in 2023,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Material Shortages Worsen Somewhat in German Manufacturing
Material shortages in German manufacturing have become slightly worse. In February, 14.6% of the companies surveyed reported shortages, up from 12.5% in January. These are findings from the ifo Institute’s latest survey. “In addition to the ongoing conflict in the Red Sea, the rail strike in Germany has also led to a shortage of raw materials and intermediate products at some companies,” says Klaus Wohlrabe, Head of Surveys at ifo. “Nevertheless, the supply bottlenecks are not a fundamental problem for industrial production. At present, we’re mainly seeing delays within supply chains, not a total breakdown.”
Price Expectations of German Companies Fall
Fewer companies in Germany are looking to raise their prices. In February, the ifo price expectations slipped to 15.0 points, down from 18.8 points* in January. This was mainly due to the consumer-related sectors, where price expectations fell from 32.4 points* to 28.9 points. “This suggests that in the coming months, inflation will continue to decline,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Business Climate in the German Chemical Industry Stagnates at a Low Level
The business climate in the German chemical industry stagnated at a low level in January. The value slipped to -15.9 points, down from -15.4 points* in December. Companies rated their current business situation at -17.1 points, which is slightly worse than in the previous month. At -14.6 points, the level of pessimism in their business expectations remained virtually unchanged. “Germany’s chemical industry is still very much in crisis,” says industry expert Anna Wolf of the ifo Institute.
Sentiment in German Residential Construction at an All-Time Low
The business climate in German residential construction has fallen from -56.9 points to -59.0 points – the lowest value ever measured. The same is true for business expectations, which have sunk even further, dropping from -64.7 points to -68.9 points. “The outlook for the coming months is bleak,” says Klaus Wohlrabe, Head of Surveys at ifo. “Residential construction is still facing the double whammy of a lack of new orders and ongoing project cancellations.”
Weak Start to the Year for German Retailers
The ifo Business Climate in Germany’s retail deteriorated in January. Both the current business situation and business expectations for the coming months clouded over. “Consumer restraint and a lack of skilled workers will likely continue to pose challenges for many retailers in 2024,” says ifo expert Patrick Höppner.
Lack of Orders Weighs on the German Economy
The lack of orders in manufacturing is increasingly becoming a burden on the German economy. In January, 36.9% of manufacturing companies reported a lack of orders, up from 36.0% in October. A year ago, the proportion was just 20.9%. In the service sector, the proportion rose from 29.3% to 32.1%. “The lack of orders has worsened noticeably over the past year. Hardly an industry has been spared,” says Klaus Wohlrabe, Head of Surveys at ifo. “What’s more, order backlogs are shrinking.”
Material Shortages Noticeably Better in German Manufacturing
Material shortages in German manufacturing continue to reduce. In January, 12.5% of the companies surveyed reported shortages, down from 18.2% in October. “At the moment, the attacks on commercial shipping in the Red Sea aren’t affecting the supply situation for raw materials and intermediate products,” says Klaus Wohlrabe, Head of Surveys at ifo.
German Automotive Industry Can Breathe Again
The business climate in the German automotive industry eased substantially in January, with the indicator rising to -6.3 points, up from -15.8 points* in December. “Companies in the German automotive industry are more positive about their current business situation and are much more optimistic about the coming months than they were at the end of 2023,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
More of Germany’s Consumer-Related Companies to Raise Prices
More of Germany’s consumer-related companies are planning to raise their prices. The ifo price expectations for these industries rose from 32.3 points* in December to 32.9 points in January. Price expectations increased noticeably among consumer-related service providers in particular, from 37.3 points* to 42.1 points. In retail, by contrast, the proportion of companies planning price increases declined; the balance there fell from 30.0 points* to 28.6 points. “This suggests that in the coming months, inflation will subside, but only slowly,” says Timo Wollmershäuser, Head of Forecasts at ifo.
