Germany's GDP expected to shrink

Germany's gross domestic product, or GDP, is on course to shrink by 0.2 percent in 2024, according to the German Chamber of Commerce and Industry, or DIHK.

The organization predicted on Tuesday, revising its May forecast that GDP would neither expand nor contract during 2024.

And the DIHK had more bad news for Germany's government, predicting GDP will be stagnant during 2025. If that happens, it would mean Europe's largest economy had failed to grow for three consecutive years.

Martin Wansleben, chief executive of the DIHK, said: "We are not just dealing with a cyclical, but a stubborn structural crisis in Germany."

His report said there is little to suggest business expectations will improve in the immediate future.

"We are greatly concerned about how much Germany is becoming an economic burden for Europe and can no longer fulfill its role as an economic workhorse," the Reuters news agency quoted him as saying.

The DIHK report was based on a survey of 25,000 companies operating in a wide range of sectors and German regions.

Some 31 percent of respondents said they expect the business situation in Germany to worsen. In the previous survey, 26 percent made such a prediction. And, in the latest survey, only 13 percent of companies said they expect the economic situation to soon improve.

The survey showed that a third of companies plan to reduce their investments in Germany. In the industry, it is even 40 percent.

Companies are worried about the location conditions in Germany. The survey showed that 57% of the companies see uncertain economic policy framework conditions as a risk, followed by labor costs with 54 percent of the companies and shortage of skilled workers with 57 percent of the companies surveyed.

"This is a clear alarm signal," Wansleben said, as he called on the German government to champion "profound reforms" of the business environment.

The report will be disappointing reading for Germany's coalition government led by Chancellor Olaf Scholz ahead of federal elections next September and amid poor performances in recent opinion polls.

But the DIHK report was partially off set by the latest Forward-Looking Consumer-Climate Index for Germany compiled by research group GfK and the Nuremberg Institute for Market Decisions, which was also published on Tuesday.

The latest edition of the monthly survey said German consumers are becoming increasingly confident because of lower inflation rates and higher salaries, despite their pessimism about the economy.

The report said it expects consumer confidence to grow by 2.7 points, to minus 18.3 points, during November, an improvement on previous expectations of it hitting minus 20.5 points.

The report said consumer confidence is now at its highest level since April 2022.