Companies pessimistic: DIHK: German economy will shrink by three percent in 2023

German companies are firmly anticipating a recession and are preparing for another economic slump in the next twelve months.

"Companies fear that the worst is yet to come," said DIHK General Manager Martin Wansleben on Wednesday when presenting the nationwide IHK economic survey of more than 24,000 companies from all sectors and regions.

According to this, more than half of the companies (52 percent) assume that their own business will deteriorate in the next twelve months.

Only eight percent expect an improvement.

"This is the worst value that we have ever measured since the survey began in 1985," emphasized Wansleben.

"Even in the times of Corona and the financial market crisis, the proportion of optimists was more than ten percent." That is why the Association of German Chambers of Industry and Commerce (DIHK) sees its very subdued economic expectations from spring confirmed: "This year we expect an increase of 1.2 percent of the gross domestic product.” Because economically, the first half of the year was still decent.

In addition, many companies could have opened their shops again for the first time this year without lockdown restrictions.

"The energy price crisis, inflation and the sluggish world economy have been eating up these growth impulses for months," said Wansleben.

The German economy is not only facing a hard winter, but also a difficult year.

"In 2023, based on the concrete reports and assessments from the companies, we expect a decline in economic output of around three percent."

High energy prices as a business risk

The DIHK expects around eight percent inflation this year and next.

The energy crisis is burdening the economy across almost all sectors.

82 percent of all companies – more than ever before – classify energy and raw material prices as a business risk.

Industry in particular is affected by higher energy prices and uncertainty in the energy supply.

"The effects can be felt in concrete terms: the energy-intensive manufacturers of intermediate goods in particular are reducing their production," said Wansleben.

In the chemical industry, more than one in four companies see themselves forced to cut back, in the rubber and plastics industry more than one in five.

In the automotive industry, too, 16 percent of companies – and thus every sixth company – are reducing their production.

About 17 percent of car companies are planning to relocate production abroad because of the high energy prices.

Lobbyist Wansleben appealed to politicians to make Germany more attractive and competitive as a business location.

"Everything must be done to ensure that companies regain confidence and invest in the future here." The DIHK general manager also repeated the mantra of the economy that the government should not burden companies with additional bureaucracy in the crisis.

Weak demand causes exports to fall

Meanwhile, German exports fell surprisingly in September due to weaker demand from the EU countries and China.

Exports shrank by 0.5 percent on the previous month to 134.5 billion euros, as the Federal Statistical Office also announced on Wednesday.

Economists polled by Reuters had expected a small rise of 0.1 percent after an upwardly revised 2.9 percent increase in August.

Goods worth 73.4 billion euros were exported to the member states of the European Union (EU) in September.

Compared to August, exports to these countries fell by 1.7 percent.

5.6 percent more goods were exported to the USA than in August.

This increased exports to the United States to a value of 14.5 billion euros.

Exports to the People's Republic of China, on the other hand, fell by 2.0 percent to 8.9 billion euros.

German imports also fell in September compared to the previous month - by 2.3 percent to a volume of 130.8 billion euros.

Most imports came from China.

Goods worth 16.7 billion euros were imported from there, which was 5.4 percent more than in the previous month.

Imports from the United States, on the other hand, fell by 1.3 percent to 8.1 billion euros.

Despite all the risks, the mood among German exporters has recently brightened somewhat.

Export expectations increased somewhat in October, as the Munich Ifo Institute recently found out in its monthly company survey.

"The situation for exporting companies remains difficult," said Ifo President Clemens Fuest.

"The high level of uncertainty triggers reluctance to receive new orders from abroad."