German economy expects "economic shock paralysis" for 2024 as well

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The German economy does not expect an upturn in the coming year either. Only 23 percent of companies are positive about 2024, while 35 percent have negative expectations, according to a survey of more than 2200,<> companies by the employer-oriented Institute of the German Economy. The economic survey thus signals "a continuation of the economic shock paralysis in Germany," according to the study, which was made available to the Reuters news agency on Monday.

Business expectations have fallen back to the level of autumn 2022, which was marked by energy price shocks, high inflation and the risk of energy shortages. "The sharp rise in energy prices in the wake of the Russian invasion of Ukraine, the associated general increase in prices, geopolitical uncertainties and the significantly declining momentum of the global economy explain the economic standstill in this country," say the researchers led by IW head of economic forecasting Michael Grömling.

This has consequences for jobs and investment. Only one in five companies expects an increase in employees in the coming year, while 35 percent expect to reduce their workforce. "This signals that the boom in the labour market in Germany, which has prevailed for a long time, is likely to have come to an end for the time being," it said. Only 27 percent plan to spend more capital than in the year that is coming to an end, while 36 percent plan for lower budgets. "The weakness in investment will not be overcome in 2024," concludes the IW.

The survey also points to a continuation of the construction and industrial crisis in Germany. 25 percent of industrial companies expect higher production in 2024, but 38 percent expect a decline. Among construction companies, as many as 54 percent expect a drop in production, while only 13 percent expect an increase here. The business prospects of service providers, on the other hand, are almost balanced: 26 percent expect better business, 27 percent worse.

mik/Reuters