Business situation of German suppliers continues to deteriorate

The latest ifo data on the German supplier industry underpins the categorisation of the precarious economic situation presented at the Hannover Messe. The business climate for German suppliers moved sideways in April. Due to the marginal deterioration of 0.6 points, the seasonally adjusted ifo value stands at -23.3 points.

Expectations for the next six months improved by a significant 6.9 points on balance and now stand at -20.2 points. Although the negative outlook still predominates, this is the highest level in a year. The proportion of those who see an improvement in business over the next six months has risen accordingly for the fourth time in a row.

Nevertheless, it is difficult to see the improvement in expectations as a positive signalling effect. After all, the assessment of the current business situation deteriorated on balance by 7.3 points to -26.3. The last time German suppliers assessed their business situation more unfavourably was in August 2020 under the impact of the coronavirus pandemic. With the assessment of the business situation marking a new low in the recent past, it is not surprising that expectations are technically improving in light of this serious situation. For example, only 14% of companies currently expect the business situation to improve over the next six months, while the proportion of those who describe the current business situation as ‘good’ is just as high.

While the signs for 2024 were pointing towards recovery for a long time, the forecasts for economic development have been successively adjusted downwards in recent months. As a result, medium-sized suppliers are starting the year with no order backlog and no prospect of an impetus in demand in the near future. This is also reflected in the current data. Accordingly, production in the first two months of the year fell by 4.9 per cent compared to the same period last year, while turnover was around 4.1 per cent lower.

The business climate index for the supplier industry is calculated by the supplier industry working group ArGeZ in collaboration with the Ifo Institute, Munich. It is based on a survey of around 600 companies and covers the foundry industry, aluminium industry, plastics processing, steel and metal processing, non-ferrous metals industry, rubber industry and technical textiles, all of which are members of the supplier industry working group.