German Firms Cut Back Their Assessment and Expectations

The German Chamber of Industry and Commerce survey (DIHK) shows a steady if not rapid deterioration in the current assessment and in the expectations for the period ahead. Economic conditions slipped from a reading of +24 in Q2 to +17 in Q4 dropping their standing to the 69^th percentile from the 80^th percentile previously. Business expectations dropped from +6 to -9 as the percentile standing fell to the 41^st percentile from the 76^th percentile, a sharp drop off and a move away from a nice position above the range midpoint to substantially below it.

Investment intentions have also crossed into negative territory, dropping from +6 to -2. But in terms of the percentile standing, the drop off is not as severe as the percentile fall from the 78^th to the 60^th percentile still leaves a firm reading in place not one that is below average. A modest negative number is still above the mid-point response for German firms’ capital spending intentions. Hiring intentions also fell to a negative reading from +6 in Q2 2008 to -3 in Q4 2008. Similarly the percentile ranking fell from the 86^th to the 66^th percentile for hiring plans.

The survey was conducted in late September and early October so some of the worst of the recent financial markets events were probably not taken into consideration in the survey. However in mid and late September the stock market was extremely choppy and volatile. It is unclear how much of this affected respondent expectations and assessments.

In the survey German firms also expressed more concerns about foreign growth and with that diminished expectations for German exports.