The DIHK's business survey shows no signals of a new beginning. Interest rates are increasing, and China's economy is slowing. Depreciation should be simplified, and bureaucracy should be eliminated.
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| Berlin, Germany |
Because of rising interest rates, the German economy is concerned about the economy and its capacity to invest. The most recent economic study conducted by the Chambers of Industry and Commerce (IHK), which has not yet been published, indicates that just 28% of businesses plan to raise their investments in the upcoming 12 months.
Since the start of the year, when it was just 27%, the situation has not much improved. Two percentage points fewer than at the start of the year, 24 percent of respondents still expect investments to decline. Early in the summer of 2022, 29 percent of people planned to boost their spending and 23 percent to cut down.
Economic growth of 5% would be needed in 2023 in order to equal the level in 2019: But it is still a long way off, I think. Just 0.4% is what the federal government anticipates. Wansleben said, "There is no indication of an optimistic attitude in the German economy. "Remarkable resilience and creative power" were displayed by the firms. However, "above all the momentum in investments that we should finally experience after all the years of crisis" is what is lacking.
Increasing interest rates in the main problem
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| Investment graph in Germany (Source:FAZ/BundesBank) |
Every fifth firm today labels its finance as being "particularly impaired" due to the rising cost of borrowing. Since the beginning of summer 2022, the value has more than quadrupled from the original 6 percent. More over a third of those polled who consider changes in interest rates to be a burden wish to scale down their investments. This is the outcome of the FAZ's preliminary analysis of 21,000 businesses for the IHK business survey. This Monday in Berlin, the full results of the survey will be disclosed.
Interest rates, according to Wansleben, have "correctly" increased to combat inflation. However, they impose strain on business budgets. The capacity to invest is further hampered by the continued high cost of electricity and raw materials. The real estate market and building projects were notably impacted by interest rates. "Severely impaired financing" was reported by one-third of these businesses.
In the case of house development, Wansleben noted that not only would loans from the businesses themselves be more costly, but also building loans from the clients. "This is a significant problem that affects the entire business. Because it is necessary to the federal government's aim of considerably more apartment construction. Since individuals relocating or immigrating from outside needed enough cheap homes, he connected the sluggish housing market to the lack of competent labor.
The head of DIHK urged policymakers to ease business regulations for corporations. According to Wansleben, "it is now crucial that the laws pertinent to energy supply and climate policy lead to additional investments and quicker processes." "You must not stifle the economy with exorbitant costs and excessive bureaucracy." This holds true for both the supply chain due diligence regulations and the energy laws.
The association is somberened by the global market, from which "no strong boost for the German economy" is to be expected; rather, one sees a "sluggish demand". The largest trading partner, China, saw a 12 percent decline in exports during the first quarter of 2018.
Wansleben suggested streamlining depreciation and reducing bureaucracy to strengthen investment incentives. Almost no other developed nation would require businesses to produce so many reports and meet so many documentation requirements.
Additionally, there are unfavorable economic indicators for research and development. The majority of managing directors and self-employed people—85%—believe that innovations will have a significant impact on the future of the business location. However, just 25% still consider Germany to be a "country of inventors". More than 57% no longer believe this to be the case. The Association of Research-Based Pharmaceutical Manufacturers (vfa) commissioned this poll, the findings of which will be made public on Wednesday at the Innovative Healthcare Day in Berlin.
Bureaucratic calamity
Nearly 91 percent of managing directors and the self-employed said that Germany was not making enough efforts to safeguard its economic future. It was 84 percent for all responders. More than two-thirds of the populace and more than three-quarters of managing directors support further bureaucratic cuts as a means of ensuring prosperity. Better investment conditions, the training and education of talented people, and a more successful distribution of income, for instance through taxation, are further key considerations. It's odd that the call to "promote digitization" only comes in sixth place.
The pharmaceutical and healthcare sectors are still regarded as having especially high research capacities. The managing directors and independent contractors, however, are more likely to think that mechanical engineering will lead to significant future advancements. The energy industry, followed by electrical engineering, is the leading development driver among all responders. Most significantly, most polled anticipate well-paying jobs from the contemporary important industries. "New ideas" are essential for self-employed people and managing directors.
Source: Christian Geinitz/FAZ