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
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.
Business Climate in the German Chemical Industry Deteriorates
The ifo Business Climate in Germany’s chemical industry worsened in December 2023. It fell to -15.2 points, down from -13.0 points* in November. “Although the chemical industry seems to have bottomed out, there is still no sign of an impending upturn,” says industry expert Anna Wolf from the ifo Institute. Companies were less negative about their current business situation in December than in the previous month. However, their business expectations deteriorated significantly to -14.6 points, down from -6.5 points* in November.
Banks Slightly Less Reluctant to Lend to Companies in Germany
It has become slightly easier for German companies to obtain new loans. In December, 25.6% of companies in ongoing credit negotiations reported restraint on the part of banks; in September, that figure was 29.2%. “However, the banks remain cautious when it comes to lending,” says Klaus Wohlrabe, Head of Surveys at ifo.
Sentiment in the German Automotive Industry Remains Subdued
The ifo Business Climate Index for the German automotive industry remained virtually unchanged at a low level in December 2023. “However, companies in the industry were generally slightly more optimistic about 2024 than they were in November,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Business Climate in German Residential Construction at All-Time Low
The ifo Business Climate Index for residential construction has sunk to an all-time low. Sentiment in December fell to -56.8 points, down from -54.4 points in the previous month. This is its lowest level since the survey began in 1991. Dissatisfaction with the current situation is escalating. Companies also fear further business losses in the first half of 2024. “Although interest rates for home loans have recently been falling again, there is as yet no sign that the situation is easing,” says Klaus Wohlrabe, Head of Surveys at ifo. “These exceptionally weak expectations show that companies currently have no hope. The prospects for 2024 are bleak,” Wohlrabe says.
Weak Holiday Trade Weighing on Many Retailers
The business situation for Germany’s retailers has deteriorated. The indicator fell from -8.8 points in November to -12.1 points in December. “For many retailers, business in the first weeks of the holiday season wasn’t as good as they had hoped,” says ifo expert Patrick Höppner. Their expectations for the coming months also darkened further and remain largely pessimistic.
Price Expectations Rising Again in Germany
The proportion of companies in Germany that want to raise their prices in the coming months is increasing again. The ifo price expectations rose to 19.7 points in December, up from 18.1 points* in November. Price expectations reached their temporary low in August 2023 at a balance of 14.5 points. “This means the decline in inflation rates is likely to stall for the time being,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Gloomy Prospects for Residential Construction in Germany
The clouds continue to gather over German residential construction. More and more companies are lamenting a lack of orders. In November, 49.1% of businesses had this complaint, up from 48.7% in the previous month. This is now the eighth increase in a row. Order cancellations were reported by 21.5% of companies, almost as many as in the previous month (22.2%). “Residential construction companies are hemorrhaging customers. High construction costs and the current interest rate level are causing many builders to despair. Many projects simply no longer pay off under these conditions and have to be postponed or canceled,” says Klaus Wohlrabe, Head of Surveys at ifo.
Friday and Monday Most Common Days for Working from Home in Germany
In Germany, the days on which working from home is most prevalent are Friday and Monday, finds a recent ifo Institute survey. “Friday is the most common day for working from home in 55% of companies, ahead of Monday at 35%. By contrast, Tuesdays, Wednesdays, and Thursdays are usually office days, also for employees who work from home some of the time,” says ifo researcher Simon Krause. This pattern can be seen in all sectors of the economy and across small, medium-sized, and large companies, albeit to different degrees. “Especially on Fridays, many offices are empty in companies with a large proportion of people working from home,” he adds.
Business Climate in Germany’s Chemical Industry Improves Slightly
The business climate in Germany’s chemical industry improved somewhat in November, with the indicator rising to -12.8 points, up from -14.7 points* in October. This means the mood among chemical companies remained subdued, according to the latest ifo survey. “The long-awaited measures in the energy package have obviously not met the chemical industry’s hopes,” says industry expert Anna Wolf of the ifo Institute.
Retailers Expect Little Help from Christmas Sales
The business situation for Germany’s retailers has improved somewhat. The indicator rose from -13.5 points* in October to -8.8 points in November. According to the latest ifo survey, this is the first increase in three months. “Despite the slightly improved mood among retailers, demand – which has been weak all year – remains a challenge even in the period of strong sales during the run-up to Christmas,” says ifo expert Patrick Höppner. Christmas business is therefore unlikely to provide a surprisingly strong boost this year. Expectations for the coming months remain pessimistic.
Business Climate in Germany’s Automotive Industry a Little Cooler
Sentiment in the German automotive industry has deteriorated marginally. In November, the Business Climate Index for the industry slipped to -16.8 points, down from -16.3 points* in October. “Companies in the automotive industry rate their current business situation as better than in the previous month, but are more pessimistic about the months ahead,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Slightly More Companies in Germany Plan to Raise Prices
Slightly more companies in Germany are planning to raise their prices. The price plans index rose to 18.0 points in November, up from 15.4 points* in October. This is primarily due to business-related service providers and wholesalers, where the balance value climbed from 21.5 points* to 28.3 points. In consumer-related sectors, however, price expectations continued to fall. Among food retailers, the balance fell from 40.7 points* to 34.2 points; among other retailers, from 28.2 points* to 27.7 points; and among consumer-related service providers, from 29.3 points* to 25.5 points. “That means inflation is continuing to decline,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Most German Companies Want to Retain Current Arrangements for Working from Home
Most companies in Germany, 84%, want to keep their current rules on working from home, finds an ifo Institute survey. “This applies to all sectors of the economy and to small, medium-sized, and large companies alike,” says ifo researcher Simon Krause. Only 8% of companies would like to change their rules on working from home. “Despite the public debate about returning to the office, working from home has become firmly established in the working world,” Krause adds.
Material Shortages Noticeably Better in German Manufacturing
German manufacturing is seeing a considerable reduction in material shortages. In October, 18.2% of the companies surveyed reported shortages, down from 24.0% in September. This is a finding from the ifo Institute’s latest survey. “Things are almost back to pre-crisis levels,” says Klaus Wohlrabe, Head of Surveys at ifo. “Companies should plan now for future shortages, diversify their supply chains, and increase inventory levels.”
Business at Germany’s Retailers Somewhat Worse
The business situation for Germany’s retailers has deteriorated slightly once again. The indicator fell from -9.8 points* in September to -13.4 points in October. Expectations for the coming months have improved a little, but remain at a low level. “This means that many retailers remain uncertain about how they will fare going into the Christmas season,” says ifo expert Patrick Höppner.
Business Climate in Germany’s Chemical Industry Improves Marginally
The business climate indicator for the German chemical industry rose only a little in October. It remained in negative territory at -15.3 points, up from -18.7 points* in September. “Germany’s chemical industry continues to face an extremely challenging business environment,” says industry expert Anna Wolf of the ifo Institute.
Order Cancellations in German Residential Construction Reach a New High
Germany’s wave of cancellations in residential construction continues. In October, 22.2% of companies reported canceled projects, up from 21.4% in the previous month. “It’s getting worse all the time, with more and more projects failing due to higher interest rates and elevated construction prices,” says Klaus Wohlrabe, Head of Surveys at ifo. “In residential construction, new business remains very low and companies’ order backlogs are diminishing.”
Business Climate in Germany’s Automotive Industry Cools
The business climate in Germany’s automotive industry has cooled slightly. In October, the indicator fell to -16.1 points, down from -14.6 points* in September. “Companies in Germany’s automotive industry rate their current business situation as significantly worse than in the previous month,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Fewer Companies in Germany Expect Price Increases
In Germany, fewer companies are expecting prices to rise in the months ahead. Price expectations fell to 15.3 points in October, down from 15.7 points* in September. The most noticeable drop was in consumer-related industries. Among food retailers, the balance fell from 53.0 points* to 41.6 points, among other retailers from 31.8 points* to 28.3 points, and among consumer-related service providers from 35.1 points* to 29.3 points. “This means that consumer prices will still continue to rise. However, the pace will ease off and with it inflation,” says Timo Wollmershäuser, Head of Forecasts at ifo.
German Banks More Reluctant to Lend
It is becoming more difficult for companies in Germany to obtain new loans. In September, 29.2% of companies in ongoing credit negotiations reported restraint on the part of banks. In June, that figure was only 21.3%. “Banks are gradually increasing interest rates on loans and are more reluctant to grant them,” says Klaus Wohlrabe, Head of Surveys at ifo.
Majority of German Companies See Same Productivity from Working in the Office or from Home
Most German companies expect productivity to remain the same should their employees return from hybrid working to working solely in the office: 60.1% believe that employee productivity will remain the same in this case; 31.6% think it will increase with full office use; only 8.3% predict that employees would then work less productively. “The majority’s positive experience with productivity is an important reason why working from home has become established in many German companies”, says ifo researcher Mathias Dolls.
Material Shortages Ease Somewhat in German Manufacturing
Supply problems in German manufacturing continue to ease. In September, 24.0% of the companies surveyed reported material shortages, down from 24.4% in August. “Things are settling down,” says Klaus Wohlrabe, Head of Surveys at ifo. The situation remains most problematic in the automotive industry, where just under 53% of the companies reported bottlenecks in the supply of raw materials and intermediate products.
