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
Business Climate in Germany’s Chemical Industry Clouds Over
The ifo Business Climate in Germany’s chemical industry deteriorated noticeably in June. The indicator fell to -28.3 points, down from -12.5 points* in May. Business expectations in particular took a further dip. They fell to -25.6 points, down from -5.5 points in May. “High energy and production costs aren’t the only things putting a strain on business in the chemical industry. The order situation is continuing to worsen for many companies due to persistently weak global demand for chemical products,” says industry expert Anna Wolf of the ifo Institute.
Germany’s Wave of Price Increases Recedes
The wave of price increases in Germany will slowly peter out over the next few months. This is a finding from the ifo Institute’s survey. The ifo price expectations dropped to 16.3 points in June, down from 19.1 points* in May. Food and beverage retail experienced a steep decline from 61.4 points* to 45.6 points. The pace of price increases in that segment is expected to gradually lessen. “Overall, however, inflation for consumers will fall only very slowly, because for many service providers, price expectations are declining sluggishly; for example, they went down in hospitality from 34.2 points* to 32.9 points, and in travel agency activities from 46.5 points* to 45.5 points,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Blockchain Technology in Use or Planned at 6.9% of Companies in Germany
Among German companies, 6.9% are currently using or are planning to use blockchain technology for their business processes. This is the finding of a recent survey conducted by the ifo Institute on behalf of the Hanseatic Blockchain Institute. Introducing the technology is a subject of discussion at 18.7% of all companies surveyed.
Noticeable Drop in Demand for Transport and Logistics Services in Germany
Reduced demand for transport capacity is causing concern among German transport and logistics companies. “The – in some cases very significant – price increases for many transport and logistics services have led to the recent drop in demand,” says ifo industry expert Patrick Höppner. What’s more, the currently subdued development of the economy as a whole is putting additional strain on the demand for transport services – especially in the freight transport sector. In the second quarter of 2023, 35.2% of transport and logistics companies reported insufficient demand, up from 33.8% in the first quarter.
Number of Short-Time Workers in Germany Rises Marginally
The number of short-time workers in Germany has risen slightly. It stood at 144,000 people in May, marginally higher than February’s 140,000*, according to estimates by the ifo Institute based on the ifo Business Survey and figures from the German Federal Employment Agency. “Short-time work isn’t playing a significant role in the current phase of economic weakness,” says ifo labor market researcher Sebastian Link. As a share of the workforce, the figure remained at 0.4%.
Material Shortages Ease in German Manufacturing
German manufacturing is seeing fewer material shortages. In May, 35.3% of the companies surveyed reported shortages, down from 39.2% in April. “The easing provides a little relief to Germany’s manufacturers as they deal with the difficulties of the current economic situation,” says Klaus Wohlrabe, Head of Surveys at ifo. “They can process existing orders more quickly, thus sustaining production. At present, the companies surveyed have an order backlog equivalent to 4.3 months of production – much more than the long-term average of 2.9 months. The decline in orders is therefore not yet having too great an impact.”
Situation in Germany’s Automotive Industry Remains Positive, Though Expectations Worsen
The business situation has improved for German automotive manufacturers and for their suppliers in particular. The indicator rose to 28.4 points, up from 23.5 points* in April. “However, the data trend indicates that a turning point is coming because the expectations for the months ahead are consistently pessimistic,” says ifo industry expert Anita Wölfl.
Business Expectations in Germany’s Chemical Industry Take a Dip
The ifo Business Climate in Germany’s chemical industry worsened slightly in May. The indicator fell to -11.1 points, down from -3.9 points* in April. Business expectations in particular took a major dip, with that indicator dropping to -4.1 points from +11.4 points in April. The majority of companies once again described their current situation as poor. “The clouds dampening the business climate hang over all the chemical industry’s key customer sectors: the Business Climate Index fell in manufacturing and in construction,” says ifo’s industry expert Anna Wolf.
Fewer Supply Bottlenecks in German Retail
Supply bottlenecks at German retailers eased in May. In May, 41.3% of the businesses surveyed reported shortages, down from 45.7% in April. “The share of retailers affected by supply problems has been falling steadily since the beginning of the year,” says ifo expert Patrick Höppner. “However, the business situation remains gloomy for many. Fewer consumers are going to shops, and when they do they’re buying less due to inflation,” he adds.
Price Increases Level Off in Germany
Price increases in Germany are expected to slowly subside over the next few months. Accordingly, ifo price expectations fell in May to 19 points, down from 21.5 in April. In food and beverage retail, the figure also fell, but at a very high level: from 69.7 to 63.2 points. “This means inflation for consumers will fall only very slowly, because for many service providers, too, price expectations are declining sluggishly; for example, they went down in hospitality from 36.4 to 34.1, and in travel agency activities from 48.6 to 46.5 points.”
Three Times More Unused Offices in Germany Than Before the Pandemic
Remote working is leaving many German offices empty. “Currently, 12.3% of all on-site workstations are underused on an average day because of remote working. Before the pandemic, in 2019, the figure was only 4.6%,” says ifo expert Simon Krause. “In other words, the percentage of unused workstations in offices has roughly tripled.”
Food Supply Bottlenecks in Germany Continue to Ease
Supply bottlenecks at German food retailers eased in April but are still a problem for many businesses. In April, 70.4% of companies surveyed companies reported bottlenecks, down from 77.7% in March. “Despite easing supply problems, food price pressure remains high and the majority of retailers expect prices to continue rising in the short term,” says ifo expert Patrick Höppner.
German Employees Reluctant to Return to the Office
In Germany, working from home declined somewhat in the spring, from 24.7% of employees in February to 24.0% in April. “The decline has been minimal, despite discussions about returning to the office. Overall, the proportion of people working from home remains at a significantly higher level than before the pandemic,” says ifo expert Jean-Victor Alipour. In 2019, before Covid, only 10% of German employees worked from home at least some of the time.
Business Expectations in Germany’s Chemical Industry Brighten Further
The ifo Business Climate in Germany’s chemical industry brightened in April. It rose to -3.1 points, up from -10.5 points* in March. There was a particular improvement in business expectations, with that indicator rising to 13.3 points – its highest level since December 2021. However, the majority of companies surveyed described their current situation as poor. “The chemical industry is deriving confidence from the easing in supply bottlenecks and lower energy prices. But this industry’s current order situation remains weak,” says industry expert Anna Wolf of the ifo Institute.
Business in the German Automotive Industry Somewhat Better
The business situation for German automotive manufacturers and their suppliers has improved slightly. In April, the indicator for manufacturers rose to 23.7 points, up from 19.3 points* in March. For suppliers, it rose to 35.2 points, up from 34.6 points*. “Automotive suppliers are still much happier with their current situation than manufacturers,” says Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies.
Material Shortages Ease in German Manufacturing
German manufacturers are having an easier time sourcing raw materials and intermediate products. In April, 39.2% of the companies surveyed reported problems, down from 41.6% in March. “That’s good news for the sector, not least because it marks a rise in new orders,” says Klaus Wohlrabe, Head of Surveys at ifo. “But the companies would surely have also been delighted if the situation had eased even more.”
Fewer and Fewer German Companies Plan to Increase Prices
Fewer and fewer German companies are planning to raise their prices in the next three months. For the economy as a whole, the ifo price expectations fell to 21.5 points in April, down from 27.1 points (seasonally adjusted) in March. This marks the seventh consecutive decline. “This suggests that the wave of price increases has already peaked,” says Timo Wollmershäuser, Head of Forecasts at ifo.
