DAccording to the auditing company Deloitte, the economic and business expectations of large German companies are “on the way to their lowest point”. In September, Deloitte surveyed 124 CFOs of large German companies. “More than half of those surveyed assessed the situation as bad or very bad” – and “over two-thirds of the CFOs expect the prospects for Germany and the euro zone to deteriorate over the next twelve months,” wrote the Deloitte experts in their “CFO Fall 2022 survey”.
The profit expectations for their own companies are pessimistic, the investment and employment plans have been revised downwards. For more than 70 percent of the board members surveyed, cost reductions are now a priority. Innovation and new products and services are still important, but expansion into new markets is taking a back seat. Those surveyed saw the high order backlog in industry and the very stable job market as stabilizing factors.
Prospects almost as bad as with the Corona outbreak
But “the downturn is here,” Deloitte summarized sentiment. The economic and business prospects are approaching the values in the first corona wave in March and April 2020. The chemical industry, the real estate industry and the automotive industry are particularly pessimistic about their own business prospects. In addition to rising energy costs and the shortage of skilled workers, companies now count rising wage costs as the most serious risks. On the other hand, concerns about weaker domestic demand due to a loss of purchasing power also increased.
On average, CFOs assume “that wages and salaries in their own company will increase by 5.4 percent over the next twelve months,” according to the Deloitte study. “Interestingly, both the large companies with sales of more than one billion euros and the large medium-sized companies are assuming the same increase. In the chemical industry, wages are expected to rise particularly sharply by 6.3 percent.”
However, the wage increases fueled inflation, it said. The CFOs surveyed do not see it as a temporary phenomenon: in Germany they expect inflation to be 7.1 percent next year and 4.8 percent the year after that.
The CFOs rated the prospects for profit margins as “very negative”, only just above the low recorded during the euro crisis. Your investment and employment plans are now negative. “The willingness to invest is lowest in the automotive industry and mechanical engineering,” says the Deloitte study. 124 CFOs of large German companies took part in the survey between September 9 and 29, 2022.
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