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Business optimism among self-employed and small business owners deteriorated for the third straight month in June 2023, the latest Jimdo Ifo Index shows. The results of this monthly survey leave no room for doubt: sentiment in the sector has continued to deteriorate, which should prompt a call for government action.
According to Katrin Demmelhuber, an expert at the Ifo Institute, the business climate among the self-employed deteriorated worryingly in June. This was characterized by two main factors: On the one hand, the respondents assessed the current situation increasingly negatively compared to the previous months. On the other hand, expectations regarding future business development were even more pessimistic than they had been in the current year. This deterioration follows a period of recovery that began after the energy crisis bottomed out in October 2022. Hopes that the fall in April was only temporary were finally dashed. The negative trend continued in May and is now continuing.
The Jimdo Ifo Index shows that the business climate for the self-employed fell a further 4.0 points in June and is now at minus 12.6 points. In the economy as a whole, the value has fallen even more significantly, namely by 5.5 points, and is now minus 6.6 points. Demmelhuber notes that the indicators for climate and expectations in the overall economy have also fallen significantly. However, the business situation in this sector was still rated as favourable.
One alarming aspect is the declining mood among the solo self-employed and micro-entrepreneurs. In June they rated their business situation clearly negative for the first time this year. The corresponding value is minus 2.6 points, compared to minus 0.4 points in the previous month. This is in sharp contrast to the overall economy, which is still in positive territory at 13.5 but down 2.5 points from May's 16.0.
A possible reason for this development could be the slowly decreasing inflation, which leads to a decreasing pressure on prices. Price expectations have been falling for months. Among the self-employed, 15.6 percent of respondents say they are considering price increases, compared to 16.3 percent for the economy as a whole. In spring 2022, these values still reached peak values of 61.4 (overall economy) and 54.7 (self-employed).
It is important to view the ongoing negative sentiment in the context of the declining number of founders and the self-employed. The number of start-ups in Germany has fallen by two-thirds since 2002, and the proportion of self-employed people in the workforce has fallen by more than 30 percent since 2012. Andreas Lutz, Chairman of the Association of Founders and Self-Employed Germany (VGSD), comments on this development and emphasizes the need for measures on the part of the federal government to reverse this trend. Lutz calls for the establishment of contact persons in parties and ministries who are specifically dedicated to the concerns of the solo self-employed and who can build up the necessary expertise to make well-founded decisions.