Residential construction in Germany is experiencing an order shortage. More than half the companies (55.2%) in this industry reported a lack of orders in April. In March, the figure was 56.2%. “Housebuilders are looking for signs of hope,” says Klaus Wohlrabe, Head of Surveys at ifo, “but there’s no end to the crisis in sight.”
The order shortage in Germany has worsened and is an obstacle to the economy. In April, 39.5% of manufacturing companies reported a lack of orders, up from 36.9% in January. In the service sector, the proportion rose from 32.1% to 32.4%. “The lack of orders is hampering economic development in Germany,” says Klaus Wohlrabe, Head of Surveys at ifo. “Almost all industries are affected.”
Companies in Germany are proving more cautious in their personnel planning. The ifo Employment Barometer slipped to 96.0 points in April, down from 96.3 points in March. “A lack of orders is causing some companies to put the brakes on hiring,” says Klaus Wohlrabe, Head of Surveys at ifo. “But service providers in some industries, such as data processing and tourism, are taking people on.”
Sentiment in the German export industry has clouded over a little. The ifo Export Expectations fell to -2.0 points in April, down from -1.2 points in March. “The mood is somewhat subdued,” says Klaus Wohlrabe, Head of Surveys at ifo. “The export economy lacks momentum at present. While the global economy offers many good prospects for growth, these aren’t yet being reflected in additional orders.”
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.”
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.”
Companies in Germany are again looking to hire more staff. The ifo Employment Barometer rose to 96.3 points in March, up from 94.9 points in February. “Companies are currently more willing to hire because they are better able to assess the economic conditions. Skilled workers continue to be in demand,” says Klaus Wohlrabe, Head of Surveys at ifo.
Sentiment in the German export industry is markedly brighter. The ifo Export Expectations rose to -1.4 points in March, up from -7.0 points in February. “World trade ought to pick up in the months ahead,” says Klaus Wohlrabe, Head of Surveys at ifo, “and German exporters hope to benefit from this.”
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.”
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.”
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.”
Companies in Germany are looking to hire less staff. In February, the ifo Employment Barometer fell to 94.9 points, down from 95.5 points in January. “With the economy so sluggish, companies are putting off hiring new people,” says Klaus Wohlrabe, Head of Surveys at ifo. “Even layoffs can no longer be ruled out.”
Sentiment in the German export industry has brightened somewhat. The ifo Export Expectations rose to -7.0 points in February, up from -8.5 points in January. “The German export economy is hardly benefiting at all from current global economic developments,” says Klaus Wohlrabe, Head of Surveys at ifo. “There’s still a lot of room for improvement.”
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.”
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 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.
Companies in Germany have become less willing to hire new staff. The ifo Employment Barometer fell to 95.5 points in January, down from 96.5 points in December. “The difficult economic situation is now also being reflected in personnel planning,” says Klaus Wohlrabe, Head of Surveys at ifo. “Companies are rather reluctant to hire new staff. An initial round of layoffs is becoming more likely.”
Sentiment in the German export industry has clouded over. The ifo Export Expectations fell to -8.4 points in January, down from -7.1 points in December. “The German export economy is off to a worse start in the new year,” says Klaus Wohlrabe, Head of Surveys at ifo. “Exporters need fresh momentum.”
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.
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.