How optimistic about the future are the “protagonists” of the German economy themselves? Traditionally, the Business Confidence Index, edited by the IfO Economic Institute in Munich, is considered a “barometer” for the business climate in Germany. 9,000 companies from all over the country participate in the relevant research.

For the month of December, the news is unpleasant and even slightly more unpleasant than expected: the index drops to 84.7 points, while analysts had predicted a drop to 85.5 points. In any case, this is the lowest level of business confidence since May 2020, that is, since the time when the painful consequences of the pandemic began to become visible in the largest economy of the eurozone.

Along the same lines, the Datev index for Small and Medium Enterprises shows for November a decrease in turnover by 4.7% compared to the month of October. The only exception is small businesses (employing up to 49 employees)

Domestic weakness and external pressures

“The weakness of the German economy is becoming chronic,” points out the head of the IfO and professor of economics at the University of Munich, Clemens Fust. As he tells the television network N-TV “we really have a structural problem in the economy and for a long time we have not done anything to deal with it”. In his opinion, a different policy is necessary “that will focus on development, otherwise the descent will continue”. Among other things, the German economist proposes reforms in the labor market and reduction of bureaucracy, which particularly burdens small and medium-sized enterprises.

What also worries Professor Fust is that, although the international economy is going through a phase of relative stability, exporters in Germany do not seem to be benefiting from this. As the German Statistical Service announced a few days ago, the latest data for October show that exports not only did not increase, but also contracted by 2.8% compared to September. This is the largest decrease recorded within 2024. Particularly impressive was the 14% decrease in exports to the USA, which is considered the largest market for German exports.

New layoffs coming?

The Barometer for Employment, edited by the IfO Institute for the economic review Handelsblatt, also shows negative indicators from June until today. In December the index fell to 92.4 points, against 93.3 in November. “Fewer and fewer companies are hiring, while the number of companies announcing job cuts is increasing,” IfO analyst Klaus Volrabe tells Handelsblatt.