Business sentiment darkens again - Northern Germany’s economy stumbles as business confidence plummets amid persistent challenges
Northern Germany's economy faces significant hurdles, with high labor costs, surging energy and raw material prices, skilled worker shortages, and excessive bureaucracy. Despite initial optimism following recent elections, business sentiment has dampened.
The economic climate in Saxony-Anhalt has deteriorated, with a 0.3 percent contraction, lagging behind the national average. This marks a potential fourth consecutive year of recession. Manufacturing and craft enterprises in Northern Germany now hold a more pessimistic outlook compared to spring and last year, reflecting the challenging conditions.
The business climate index for both industry and skilled trades has plummeted. One-third of craft businesses report declining revenues, yet order books remain stable at 78 percent capacity. Notably, 23 percent of firms are operating at full capacity, indicating some resilience amidst the struggles.
Northern Germany's economy grapples with substantial obstacles. Despite initial optimism, businesses now face a more subdued outlook. The current government, a black-yellow-green coalition, remains in office until the September 2026 election, tasked with implementing reforms and overcoming these hurdles. The business climate index for industry and trade has dropped by 14 points to 78.3, underscoring the need for decisive action.
