Economic climate: consumption is stalling, the economy is stuttering

The German economy cannot continue to rely on private consumption as a driving force out of the growth crisis. Weak growth forecasts and rising unemployment figures are currently preventing a stronger recovery, according to the current consumer climate study by the Nuremberg institutes GfK and NIM.

For January, the GfK study predicts an increase in consumer sentiment by 1.8 points to -21.3 points. For comparison: Before the corona pandemic, the consumer climate was stable and 30 points better.

The German Institute for Economic Research (DIW) also believes that because the economy will continue to shrink next year, high energy and food prices and increasing fears about keeping their jobs, there is considerable uncertainty among consumers.

The fears are well-founded: the monthly employment barometer from the Munich Ifo Institute has fallen once again. This month the index value is 92.4 points, after 93.3 points in November. “Fewer and fewer companies are adding staff,” said Ifo survey director Klaus Wohlrabe. “The proportion of companies that want to cut jobs is increasing.” This particularly affects industry and trade.

“There are job losses, especially in the manufacturing sector, which in itself dampens private consumption,” says the new DIW economic barometer. Little positive impulses can therefore also be expected from abroad.

Exports remained weak and uncertainty surrounding the inauguration of the new US President Donald Trump and his customs policy remained high. Only interest rate cuts by the European Central Bank (ECB) are likely to provide some support to the economy.

At least there is a ray of hope: Given the weak economy, the lack of skilled workers is currently less of a problem for companies, as a survey by the German Chamber of Commerce and Industry showed. But there is no general all-clear.

According to the survey of around 23,000 companies, 43 percent of companies are currently unable to fill vacancies, at least in part, because they cannot find suitable workers and skilled workers. This is a significant decrease of seven percentage points compared to the previous year and a decrease of ten percentage points compared to 2022.

According to the DIHK, there is still a shortage of workers; in the construction industry, for example, staff are still being desperately sought in many places. There are also problems with service providers, in mechanical engineering or with producers of data processing equipment, electrical and optical products.

The number of company bankruptcies in Germany continues to rise. Based on preliminary data, the Federal Statistical Office counts 12.6 percent more registered insolvency proceedings for November than a year before. With the exception of June 2024, the growth rate has been double-digit since June 2023. It is still unclear whether all cases will actually be brought to the point where they will be included in official statistics by the insolvency courts.

The credit agency Creditreform expects 22,400 corporate bankruptcies in Germany by the end of the current year. That would be the highest level since 2015. Next year, the numbers could reach the peak of the crisis year of 2009 with more than 32,000 cases.