Hiring intentions across Germany’s private sector are the lowest since 2013, according to the latest IHS Markit Global Business Outlook survey, as a combination of subdued growth and squeezed margins looks set to weigh on firms’ profitability over the next 12 months.
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The report which asks around 800 German manufacturers and services firms for their assessment of business conditions in the year ahead shows that the net balance of firms expecting to add to their workforce numbers has fallen sharply to just +9%, down from +19% in February and the lowest since late-2013.
The equivalent figure for expected profitability is meanwhile 0%, which is the lowest in six years and shows an equal number of firms forecasting profits to increase as those predicting a decline.
Expectations towards future output have strengthened slightly since the opening quarter of 2019 but are still among the lowest over the past six years.
This largely reflects a lack of optimism in the manufacturing sector, where the survey reveals lingering concerns towards trade wars, the future of the car industry and the risk of a disorderly Brexit.
Services firms remain comparatively more upbeat, citing solid domestic fundamentals and a growing trend towards digitisation as reasons to be optimistic, though the degree of confidence here remains well below the highs in 2017 and 2018.
The slight increase in the net balance of German firms expecting a rise in business activity over the next 12 months – from February’s six-and-a-half-year low of +20% to +24% – is in line with a modest recovery in sentiment across the eurozone as a whole (from +25% to +27%).
Expectations in the UK have also improved (albeit only slightly) for the first time in over a year, up from a record low in February.
However, business confidence has worsened in all countries outside of Europe where comparable data are available, with optimism weakening in the US, Japan and across all of the major emerging economies. ■