The ifo Institute's latest economic survey reveals that 8.1 percent of German companies see their existence threatened. The retail sector is especially hard hit, with 17.4 percent of firms in an existential crisis. These figures represent a new high and are attributed to the cautious consumer sentiment.
Klaus Wohlrabe, head of ifo surveys, stated: "The economic situation remains tense. The number of insolvencies is likely to stay high in the coming months against the backdrop of geopolitical uncertainty." The hospitality and restaurant sectors are also significantly affected, further driving up insolvency numbers.
In April 2023, the Leibniz Institute for Economic Research Halle (IWH) reported 1,776 insolvencies of partnerships and corporations, marking the highest level since June 2005. Compared to the pre-crisis years of 2016 to 2019, this represents an increase of 82 percent. The crisis is spreading along supply chains, impacting suppliers and service providers as well.
The German Trade Association (HDE) warned in early May of poor consumer sentiment, as the consumption barometer fell to 92.3 points, the lowest level since February 2023. This index is derived from consumer data regarding their purchasing and saving behavior, indicating a significant drop in consumer mood.
The ifo Institute, which has been analyzing economic policy since 1949, receives about two-thirds of its budget from public grants. The remainder comes from other sources, such as policy consulting. It is led by economist Clemens Fuest and is known for its monthly business climate index.
