German business and employer associations are cautiously optimistic about 2015. They expect orders, production and sales to rise, and only a few industries are predicting workforce reductions, despite various economic and political uncertainties at home and abroad.
That’s the key message of the survey of business and employer associations conducted by the Cologne Institute for Economic Research, IW.
Michael Hüther, the institute’s director, noted that while “many order books are still full,” more and more companies see risks resulting from international and national developments. Among them: the euro zone’s weakening economy; the crisis in Ukraine and the conflict between the West and Russia; as well as the minimum wage and early retirement.
All of the issues affect the German economy. Only seven of the 48 associations assessed the current economic situation as better than a year ago, according to the IW poll. Twenty industries reported a gloomier mood. This is the worst assessment since 2008.
A year ago, 26 associations reported a positive economic outlook and market sentiment looking forward.
Many order books are full. Michael Hüther, Director, Cologne Institute for Economic Research
Yet a closer look at the latest survey shows no cause for pessimism, according to the institute. Despite the various risks, 23 of the 48 surveyed associations expect companies will either produce more or have more business in 2015 than in the previous year.
Only four sectors anticipated a decline: banks, cooperative banks, insurance companies and the mining industry.
Several large, labor-intensive sectors expect a better year than 2014. These include the chemical, pharmaceutical, steel processing, electrical and engineering industries, as well as the shipping, hospitality and tourism industries.
Makers of machine tools and plant equipment have a positive outlook, largely because the world’s largest export markets, China and the United States, are buying more goods from German producers. The construction industry also forecasts a growth in the numberof residential homes built.
Fifteen associations expect greater investments and acquisitions in key sectors such as engineering, retail, steel and metal processing, as well as shipping and banks.
The job market appears stable because of higher sales expectations. Companies in 36 associations expect steady or even rising employment.
Still, one of Germany's key sectors, mechanical engineering with more than 1 million employees, remains cautious, pointing to risks resulting from the Ukrainian conflict. Due to the crisis, exports to Russia in the first nine months of 2014 fell about 16 percent, the exports to Ukraine by nearly one third.
“We must be prepared for further setbacks,” said Reinhold Festge, president of the German engineering industry association, VDMA. But Mr. Festge was also quick to note that Russia accounts for only 4 percent of the sector’s total contracts.
While the sanctions against Moscow and order cancellations are dampening the general mood among German machinery and plant equipment producers, business in the United States is booming and gaining momentum in parts of Asia. As a result, the sector expects a production increase of 2 percent in 2015.
Ulf Sommer covers companies and markets for Handelsblatt. To contact the author: [email protected]