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Bad atmosphere is putting the brakes on investment

Current figures about the business climate from both small and large companies in manufacturing industries show that expectations are plummeting. This could also lead to postponements in investment in the area of digitization.

29 Aug. 2019
Photo: Windcloud 2018

According to the latest figures from the KfW-ifo medium-sized company barometer, the expectations of German companies regarding business development are continuing their downward trend. Among small and medium-sized enterprises (SMEs), the business climate index fell despite a solid assessment of the current business situation in July by 2.1 points to 2.6 balance points. The atmosphere in large companies is even worse. Sinking expectations and a situation that is perceived to be getting worse account for the decline in the business climate index by 5.8 points, which has taken this to -10.8 balance points, close to its all-time low during the euro crisis of December 2012.

The study identifies the reason for this in particular as the increasing pessimism in manufacturing industry in view of the fear of a no-deal Brexit and regulatory and technological uncertainties in the automobile industry. The negative trend could put the digital transformation in industry at risk: in view of the low levels of investment that persist in some sectors , there is a fear that companies could push it back into the long grass.