economy | Bad atmosphere and expensive car repair shops

Only in the motor vehicle industry has there been an increase in sales recently. Photo: dpa/Hannes P Albers Worrying news is now reaching us not only from industry, but also from the trades. In the traditionally successful sector of the economy, sales fell by 1.4 percent in the period from April to June compared to the same quarter last year, as the Federal Statistical Office (Destatis) in Wiesbaden announced on Thursday. At the end of June, six million people worked in skilled trades requiring registration - 1.9 percent fewer than in the previous year.

The economic downturn is likely to continue. Not only did sales fall in the second quarter, but the working atmosphere also deteriorated. “The mood is approaching a level that we last experienced during the Corona period,” said craft president Jörg Schmieder in a recent interview with the “Frankfurter Allgemeine Zeitung”. This is proven by the latest economic report from the Central Association of German Crafts (ZDH): The business climate index, which reflects the situation and expectations of companies, slipped by 13 points to 102 points compared to the already bad-tempered quarter of the previous year. 

ZDH President Schmieder considers the situation in the craft sector to be “overall worrying”. What worries him most is the slowdown in companies' investment activity: "For some, they are not profitable under the current conditions, while others are cautious because of the great uncertainty."

Unlike in normal times, the situation in the diverse economic sector is not good almost across the board. The largest real sales declines of all seven trade groups in the craft sector were recorded in the second quarter by the finishing trades, the trades for commercial needs and the food industry, each with a loss of 2.4 percent. The construction industry recorded a decline in sales of 1.8 percent, followed by the trades for private use with minus 1.6 percent and the healthcare industry with minus 1.0 percent.

The weakening of personal services such as physiotherapy or medical foot care shows that something is fundamentally wrong.

The weakening of personal services such as physiotherapy or medical foot care shows that something is fundamentally wrong. At the same time, spending in other healthcare sectors increased rapidly. Other close service providers such as hairdressers are also weakening, although potential customers achieved slight increases in income. The hairdressers' guilds explain this with the widespread uncertainty among consumers in the face of global polycrises and a federal government that is being criticized, which is dampening the enthusiasm for spending. 

In addition, the number of employed people in Germany has been falling for the first time in years in recent months. According to the ZDH, this development in the labor market is also weakening the demand for craft services. Nothing about special assets, construction turbo and special investment depreciation seems to have reached the trades so far. Above all, there is a lack of private investments, which on average make up around three quarters of all investments in Germany.

And then there are the prices: Normal people can hardly afford a tradesman anymore, complains association boss Dittrich. At the top of the wish list would therefore be additional wage costs. They hit the trades particularly hard, as the wage share of sales averages 60 percent - that's more than twice as much as in industry. There are also regulatory cost drivers such as the receipt requirement, which requires expensive cash register systems, as well as price increases for energy and materials. 

Some trades can master the challenges better and within the seven trades there are also differences by region and size class. There was a real sales increase in the motor vehicle industry in the second quarter of 0.4 percent. The car repair shops can pass on increasing costs more easily (to the insurers) than most of the other million craft businesses and benefit from the trend towards expensive SUVs. 

The figures from the Federal Statistical Office refer to the “licensed” trade, which is aimed at the so-called compulsory master craftsman. This legal regulation only allows master craftsmen to run a business and train apprentices. What ensured quality was seen by Gerhard Schröder's economically liberal red-green federal government as a restriction of market access. In 2004, the number of trades requiring master craftsmen was significantly reduced: from the original 94 to just 41. After bad experiences, the Merkel government reintroduced the master craftsmanship requirement in a dozen trades. But the non-licensed trades, which account for a quarter of all businesses, are also making less sales this year.

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