The latest data from Germany paints a mixed picture of the economy. While the DIW business barometer signals the first above-average GDP growth in almost two years, consumer sentiment unexpectedly deteriorated ahead of March. Simultaneously, industrial giants like Schaeffler are announcing a strategic transformation towards robotics and defense, and companies – despite better economic conditions – are planning further job cuts due to fears of geopolitical uncertainty.

Surprising DIW Optimism

The DIW business barometer indicates GDP growth above average, which is the best signal in almost two years.

Consumers on the Defensive

The sentiment index fell to -24.7 points, and Germans are saving capital most eagerly since 2008 due to concerns about the future.

Schaeffler Bets on Robots

The giant in the automotive parts sector is reducing its dependence on cars, investing in robotics and defense divisions.

Employment Paradox

Despite better economic forecasts, more and more companies are planning job cuts instead of new hires.

The German institute DIW Berlin delivered surprisingly positive signals, indicating that the German economy is emerging from a phase of stagnation. For the first time in nearly two years, indicators suggest GDP growth exceeding the average, driven mainly by domestic demand from the end of last year. However, this analyst optimism is not reflected in public sentiment. The GfK/NIM consumer confidence index for March fell to -24.7 points, a result worse than forecasts that assumed stabilization. Germans are currently showing a propensity to save not seen since the 2008 global financial crisis. At the same time, the industrial sector is undergoing deep structural transformation. The Schaeffler Group, traditionally linked to the automotive industry, announced a radical shift towards the production of humanoid robots and defense technologies. This decision aims to make the company independent from the weakening automotive sector, which is grappling with high energy costs and technological transformation. Despite better macroeconomic prospects, the Ifo employment barometer indicates a growing readiness among companies to reduce staff. Firms prefer to hold off on recruitment, fearing the effects of geopolitical tensions and uncertain trade regulations under the new US administration. The German economic model for decades relied on cheap energy from Russia and exports to China. Russia's aggression against Ukraine in 2022 forced a painful revision of this strategy, which continues to impact the competitiveness of its industry.On the political scene in Berlin, there is renewed talk about Annalena Baerbock, who, after leaving the government, remains an influential figure in the debate about the future of the international order. Her return to public activity coincides with the debate on the so-called "German question" in Europe, where Berlin is trying to balance the needs of its own economy with responsibility for the continent's security. Italian media, analyzing the situation in their neighbor, warn that weak consumption in Germany could become a brake for the entire eurozone, even though financial markets are temporarily ignoring these concerns, focusing on the results of technology companies. -24,7 pkt — was the consumer confidence index in GermanyConsumer Sentiment in March: Germany: -24.7, Forecast: -24.2, Previous month: -24.2Strategic Change at Schaeffler: Main Pillar: Automotive Parts → Robotics and Defense; Dependence on Automotive: Very High → Being Reduced (Diversification)

Mentioned People

  • Annalena Baerbock — Former German Foreign Minister, returning to public debate in Berlin.