(MENAFN) Germany's corporate sector remains mired in pessimism as the nation's economic malaise persists under new leadership, with businesses warning that authorities have diagnosed the crisis but "it has yet to deliver the necessary impact," a fresh survey reveals.

The German Chamber of Industry and Commerce (DIHK) unveiled its Fall 2025 business climate assessment Thursday, capturing sentiment from approximately 23,000 companies spanning every industry and geographic region.

Helena Melnikov, chief executive of DIHK, warned that conditions failed to improve during summer months, noting instead that "the sentiment deteriorated slightly once again."

Chancellor Friedrich Merz had pledged to the corporate world that economic revival would materialize by summer's end.

Melnikov emphasized that genuine economic recovery lacks the driving force required, with DIHK projecting flat gross domestic product (GDP) performance for this year and merely 0.7% expansion in 2026.

She highlighted that deep-rooted structural challenges remain significant obstacles for enterprises, with escalating social security payments and recent minimum wage hikes delivering substantial blows to the situation, particularly hitting labor-dependent industries such as hospitality and food service.

She emphasized that business capital expenditures remain 10% beneath pre-pandemic benchmarks five years after the coronavirus outbreak began, calling on authorities to rein in expenses like social security, dramatically slash regulatory burdens, and execute a promised electricity tax cut for all enterprises, not exclusively manufacturing.

DIHK projects export volumes will contract 1% this year due to US trade barriers, following last year's 2.1% drop, with next year forecast to deliver only marginal 0.5% gains.

DIHK's confidence metric, which tracks present economic conditions and surveyed firms' business outlook, slipped 1 point to 93.8. Among the 23,000 enterprises polled, 15% anticipate economic improvement within 12 months, whereas 27% predict further deterioration.

Roughly 22% of responding businesses intend to expand investments while 31% plan reductions, with just 11% preparing workforce expansion. Some 24% are considering staff cuts, and 56% of companies identify labor expenses as among their most critical business threats.

Meanwhile, the German economy contracted 0.2% during the second quarter following 0.3% first-quarter expansion, sidestepping recession and experiencing stagnation in the third quarter. Elevated energy expenses, anemic international demand, and steep US tariffs represent the most acute barriers to expansion.

Germany grapples with semiconductor scarcity, triggering automotive production shutdowns, and China's manufacturing surge, as the nation has eliminated dependency on Germany for goods it previously imported rather than produced domestically.

German authorities vowed to extract the economy from stagnation through aggressive infrastructure and military spending increases, though the policy measures' impact will require longer than anticipated to materialize.

Germany adjusted its 2025 growth projection from 0% to 0.2% on Oct. 8, while forecasting economic rebound with 1.3% growth in 2026 and 1.4% in 2027, driven by government expenditure.

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