Losing momentum

Weakening Global Economy Hits Home

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A global slowdown is dragging down Germany.
  • Why it matters

    Why it matters

    The global economy is slowing down, with emerging markets and China all facing financial slumps and the diving price of oil all contributing to a slowdown and it’s dragging on results for Germany, too.

  • Facts

    Facts

    • DAX companies earned almost 25 percent less in 2015 than expected.
    • China accounts for 6 percent of Germany’s export business.
    • Fewer than a third of German business managers expect to make profits in 2016.
  • Audio

    Audio

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German companies are used to presenting their annual results with fanfare. But this results seasons, as the global economy heads for the rocks, directors are having to manage the expectations of their investors, and their staff.

Heinrich Hiesinger, chief executive of the steel giant ThyssenKrupp, warned of “massive overcapacity” in the steel market. Kurt Bock, chairman of the BASF chemicals group, said, “its key markets are not growing as fast as expected.” Wolfgang Büchele, head of the industrial gases company Linde, complained that customers were afraid “to sign new contracts.”

These three companies are part of a wider trend. As companies on Germany’s trademark DAX index present their annual results, it is clear that economic problems in China and the global economy are hitting home. Carmaker VW and Deutsche Post have warned that lower yields are to come. Auto parts maker Continental, typically guaranteed of profits, worked to lower expectations.

Analysts have lowered their forecasts for most companies, citing slower global growth. Eighty of the 306 companies listed in the Prime Standard segment of the Frankfurt Stock Exchange reduced their profit or sales, according to auditing firm EY. The last time the situation was this bad was in 2009, when the German economy shrank by 5 percent during the financial crisis. The 30 companies that make up the DAX index were expecting sales of €80 billion ($86 billion), but will make just €63 billion in 2015, 5 percent less than the year before.

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