Business situation in the automotive sector deteriorates significantly

Fri 2nd Sep, 2022

The mood in the executive suites of the German automotive industry deteriorated noticeably in August: For the first time since April, the barometer for the business climate fell below the zero mark, as the Munich-based Ifo Institute announced on Friday regarding its survey. The main reason for this is that the business situation was assessed much more negatively: This value sank to minus ten points, after it was still at plus 7.5 points in July. Expectations brightened somewhat. Here, the barometer climbed from minus four to zero points. "The general clouding of the economy is also evident in the automotive sector," said Ifo expert Oliver Falck. "At the same time, suppliers are in a much worse mood than manufacturers."

The business climate index among auto manufacturers turned to minus 1.6, down from plus 5.8 in the previous month. "This was mainly due to a significantly more pessimistic assessment of their current situation," it said. Expectations for the coming months, on the other hand, were assessed more positively. Among suppliers, the business climate plunged to minus 11.4 points, having already stood at minus 4.9 points in July. Here, too, companies assessed their current situation as significantly worse than in the previous month, while the outlook brightened only slightly. At the same time, companies are more reluctant to hire new staff: The corresponding indicator for employment plans in the sector fell from plus 9.5 to minus 3.6 points.

The automotive industry has adjusted its expectations for the current year due to the material bottlenecks exacerbated by the Ukraine war and rapidly rising costs. While the situation in China has improved following the Corona lockdowns, expectations for the USA and Europe are being dampened by high inflation and rising interest rates, the German Association of the Automotive Industry (VDA) explained. For the U.S., for example, the VDA corrected its forecast significantly and, after previously predicting a slight decline of one percent, now expects sales to fall by seven percent to 13.8 million vehicles.

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