business report of GFT 

General Economic Development

Last year's second major crisis over shortages of components and faltering logistics also seemed to ease at the beginning of 2022. However, the Chinese government's strict corona policy caused problems again and again throughout the year, for example when workers could not get into factories due to lockdowns or when ports were paralysed. This repeatedly led to bottlenecks in electronic parts and components, which ultimately had a not insignificant impact on the ability of GFT suppliers to deliver.

In addition to the supply crisis the Ukraine war also showed us how interconnected and vulnerable global production chains are and how seemingly unrelated events at one end of the world can have an impact elsewhere. For in addition to the great suffering and destruction that the Russian attack has brought to the country, it has also driven inflation in this country to heights not seen in Germany since 1951: In December 2022, the last inflation rate was +8.6 %. Energy and food in particular drove prices up, while frozen services did not become more expensive for a long time. The average inflation rate for 2022 is thus expected to be +7.9%.

Despite the many challenges, the business situation in the skilled crafts sector was still solid. However, high energy and procurement prices, continuing material bottlenecks and, last but not least, purchasing power-reducing effects of record-high consumer price inflation were already showing up as burdening factors. The German economy has been struggling with sharply increased energy prices since the start of the Ukraine war, while the disrupted supply chains recovered only slowly and continued to pose problems for the majority of companies in Q4 2022.

ICT and security technology market figures
Source: www.bitkom.org; www.bhe.de; Own calculations

Energy Costs and Supply Bottlenecks Slow Economic Recovery

Both energy costs and supply bottlenecks have already led to production cutbacks in the manufacturing sector and weighed on the German economy's exports. After the consumption of services in particular, which were only available with restrictions during the Corona pandemic, recovered at the beginning of the year, there have recently been clear signs of a slowdown here as well. Consumers felt the inflation-related high real loss of purchasing power and increasingly restricted their consumption. In contrast to the Corona years, the entire retail sector was also affected. Construction prices rose even more sharply than consumer prices. Together with the overall economic slowdown, this development led to significant declines in construction investments from the second quarter of 2022 onwards - especially in residential and commercial construction. All of the above factors will continue to affect the economy at least in the winter half-year 2022/2023. In addition, there is still the threat of the Corona pandemic. Under these circumstances, German economic output is likely to shrink overall in the coming quarters.

Business Climate Index in the Electrical Trades Remains Stable

The business climate index in the electrical trades remains stable - despite the Ukraine war, the energy crisis and supply chain problems. At 79.5 points (ZVEH autumn business survey), it has changed only slightly.  

The market for electronic security technology (Figure 2) will grow by around 8.0 % in 2022 compared to the previous year. This will be driven primarily by the burglary (+ 11.1 %) and fire alarm technology (+ 4.2 %) segments. The segments video security technology, access control, voice alarm and smoke alarm systems + other developed at the previous year's level in terms of value.  

The reason for the continued positive mood is that the order cushions of the e-trade companies have grown further in the meantime. Almost 60 percent of the companies have orders for more than two months. The growth in orders can be explained, among other things, by the rising demand for services in the field of renewable energies. Photovoltaic systems (PV), heat pumps and storage technologies are experiencing a boom in demand due to rapidly rising energy prices. In response to this, every fifth electrical company increased the number of its employees between spring and autumn 2022 (21.4 percent).

At the same time, however, supply bottlenecks are making it difficult to process orders quickly. Despite the growth in the sector, the growing shortage of skilled workers is also noticeable. The good news is that more and more electrical trade companies are getting involved in the markets of the future. Currently, more than 85 percent of the companies are already active in the field of "electromobility"; in photovoltaics, the figure is just under 50 percent. A third also install heat pumps. Commitment that is also expressed in growing turnover shares: turnover grew disproportionately in all three areas.

In the digital sector, too, business continues to be much better than in the economy as a whole and, for the first time since last summer, the outlook is also predominantly positive again. The current business situation of IT and telecommunications companies in January was 36.4 points, 1.2 points higher than in December. Business expectations for the coming months improved again after a strong increase at the end of the year and climbed from -0.6 to 2.0 points. This is shown by the Bitkom-ifo Digital Index. The index tracks the current business situation and business expectations for the coming three months and calculates the business climate from this. This now stands at 18.5 points, after 16.6 points in december and only 5.9 points in november.

For the economy as a whole the ifo Institute reports a business climate that remains in negative territory at -2.9 points. At 14.4 points, the business situation is assessed as slightly worse than in the previous month, when it stood at 15.2 points. Meanwhile, business expectations in the overall economy recovered slightly from -25.6 to -18.8 points, but remain clearly in negative territory.

Bitkom-Ifo-digital index (January 2023)