German economic performance in decline: DIHK fears historic economic slowdown

Companies are holding back investments, consumers are saving – according to the German Chamber of Industry and Commerce, Germany is facing a historic economic downturn. "The economic upturn that we all desire and that our country needs is not yet in sight," said DIHK Executive Director Helena Melnikov in Berlin. Fears are growing that, for the first time in Germany's post-war history, economic output will decline for the third consecutive year. "We must do everything we can to ensure this is not a lost year," she demanded.

The German Chamber of Industry and Commerce (DIHK) continues to expect a slight decline in gross domestic product of 0.3 percent for the current year. This makes the DIHK more pessimistic than the German federal government and the German Council of Economic Experts, who expect gross domestic product to stagnate in 2025.

Melnikov referred to the results of a new DIHK economic survey of more than 23,000 companies. According to the survey, while individual indicators showed slight improvements, the mood among companies remains largely poor. Only a quarter of companies rate their situation as good. Business expectations remain largely pessimistic.

According to the survey, companies see the economic policy environment, weak domestic demand, high labor costs, rising social security contributions, and high energy and raw material prices as the greatest risks. Added to this are the tightened and unpredictable US tariff policy.

Companies are continuing to wait, Melnikov said. The result: investments are being held back. There is an urgent need for action in economic policy. Melnikov cited a reduction in electricity tax to the European minimum level, easier depreciation, and less bureaucracy.

For the planned €500 billion loan-financed state special fund to be effective for additional investments in infrastructure and climate protection, comprehensive structural reforms such as faster planning and approval procedures are necessary. According to the DIHK, the industry and construction sectors could particularly benefit from the funds. The mood there has already brightened.

The new federal government has announced a package of measures to ease the burden on companies by the summer break. These include a reduction in electricity taxes and improved depreciation conditions to encourage investment. "We really want to see action now," Melnikov said.

Although economic and income expectations have improved noticeably, as reported by the consumer research institutes GfK and NIM, their data shows that consumers' inclination to spend is declining, preferring instead to save. This is dampening consumer sentiment. "The US government's unpredictable tariff and trade policies, turbulence on the stock markets, and fears of a third consecutive year of stagnation are ensuring that the consumer climate remains weak," said NIM consumer researcher Rolf Bürkl. "People apparently currently consider it advisable to save, given the general economic situation."

The DIHK survey also found that despite rising incomes, consumers are holding back on spending. Excluding the two exceptional years of 2020/2021, the savings rate of private households is at its highest level since 1996.

RND/dpa