Business Climate in Germany’s Chemical Industry Turns Gloomier Again
The ifo Business Climate in Germany’s chemical industry deteriorated somewhat in January: it fell to minus 26.0 points, down from minus 23.7 points in December 2022, according to the ifo Institute survey. Assessments of the current situation as well as expectations for the months ahead worsened. “While sentiment has brightened in the German economy as a whole, the business climate in the chemical industry remains fraught,” says industry expert Anna Wolf of the ifo Institute.
This means earnings could continue to fall, as companies are more reluctant to pass on higher prices to their customers. “The only way this can end well is if production costs can be reduced accordingly,” Wolf says. The order situation is also a cause for concern, with 40.4 percent of companies complaining about a lack of orders. A year ago, that figure was 14.9 percent. This affects the utilization of production: in the chemical industry, capacity utilization fell to 74.3 percent, down from 82.6 percent in the first quarter of 2022
“While demand for chemicals remains low, there were some bright spots at the beginning of the year,” Wolf says. The supply of intermediate products improved noticeably, with only 25.5 percent of companies still reporting bottlenecks, compared to 30.6 percent in December 2022. That is the lowest percentage since this question was first asked in August 2021. More and more companies intend to increase production. The corresponding indicator climbed to plus 10 points in January, up from minus 6.9 points. To offset weak demand in Germany, companies are planning to export more in the months ahead.
