The start of the year was subdued for many craft businesses. The construction in particular is weakening. What that also means for customers.
Many craft businesses in Germany are in a difficult situation. “There can be no talk of an economic easing in the overall trade,” said Jörg Dittrich, President of the Central Association of German Crafts (ZDH), to the German Press Agency. Housing construction in particular is still in crisis. Because there are significantly fewer new orders there, the waiting times for a craftsman here should continue to decrease, according to the ZDH.
New economic survey
The business situation in the craft sector deteriorated noticeably in the first quarter of 2024, as a new survey showed. The main reason is the weak construction sector and weak industrial demand. Overall, only 43 percent of companies reported a good business situation.
Business expectations did not indicate any economic recovery in the overall trade sector for the current quarter. However, the situation is twofold. The construction industry is suffering from weak housing construction and delays in energy and climate transformation. Building construction shows a “glaring weakness in demand”, which is particularly evident in residential construction, it said. The orders have reached the bottom of a trough. Housing construction has long been burdened by increased interest rates and construction costs.
Industrial suppliers are being burdened by the German economy’s weak exports, it said. On the other hand, consumption appears to be recovering, from which the other craft sectors benefited to a greater or lesser extent. However, due to the large weight of the construction and finishing trades in the overall trade, it is to be expected that sales will fall again in real terms for the year as a whole.
Waiting times and prices
According to the ZDH, appointments at craft businesses are currently available more quickly than they were a year ago. “But these will no longer be available the next day, unless there are emergencies. In the construction trades, backlogs of orders from previous years are still being processed, even if these backlogs of orders are decreasing and will expire in the foreseeable future.” While waiting times for craftsmen in residential construction continue to decrease, the situation is different when it comes to energy-efficient renovations. According to ZDH, demand remains high, which means waiting times are likely to remain at a high level.
Regarding the development of prices, it was said that higher expenses for materials, energy and wages could not be met without adjusting prices. In addition, there would be high burdens from reporting and verification obligations, which would tie up personnel capacity in the company and would also have to be “earned” through orders.
Crafts consider growth impulses necessary
The pressure for politicians to act has not diminished in any way, said Dittrich. “If the craft businesses that run their business on site every day report in large numbers that their orders are falling, their sales are falling, the number of employees is decreasing and they are not making investments because of too much uncertainty and a lack of reliable planning and funding conditions, then “These are facts and not badmouthing the situation.” Chancellor Olaf Scholz (SPD) had repeatedly warned against badmouthing the location.
The crafts president cited a high burden of taxes and duties that affects medium-sized businesses across the board. “The same applies to the bureaucracy, which puts a particular strain on the trades, especially due to the relatively small size of the company: In the trades, the documentation, reporting and proof obligations in most cases lie solely on the desk of the business owner. In contrast to many large businesses Corporations simply cannot afford to have their own departments just to deal with bureaucracy.”
Dittrich called for a “courageous, medium-sized business-oriented growth package”. In the upcoming negotiations on the 2025 federal budget, the government must give priority to investments in the future, i.e. more education and measures that strengthen Germany in competition.
However, the budget negotiations within the federal government are likely to be difficult because the coalition has to close billions in holes. The FDP has rejected calls for a reform of the debt brake. It is unclear what exactly a new growth package might look like and what relief volume it will have.
Source: Stern
