DIW Berlin barometer falls in August – US tariff policy weighs on the economy and jobs are lost

The economic barometer of the German Institute for Economic Research (https://www.diw.de) (DIW Berlin) fell slightly to 92 points in August – the second time in a row after reaching a two-year high in June. The barometer value thus continues to move away from the neutral 100-point mark, which indicates average growth in the German economy.

VDMA calls for improvements

Although the preliminary agreement between the EU and the Trump administration in the tariff dispute and the decision on the federal budgets for 2025 and 2026 are giving companies at least some breathing space, the outlook remains clouded by structural problems, it says.

The mechanical engineering industry is critical of the 15 per cent deal with the US. According to the industry association VDMA (https://www.vdma.org), more and more products are falling under the much higher steel and aluminium tariffs. The interest group is calling on the EU Commission to push for improvements.

Domestic demand more important

In any case, the upturn in the German economy is still a long time coming. “Foreign trade is becoming less and less important. Domestic demand, on the other hand, is becoming increasingly important,” emphasises Geraldine Dany-Knedlik, head of economic research at DIW Berlin.

Bad news also from the ifo Institute (https://www.ifo.de) in terms of jobs: the ifo employment barometer fell slightly in August to 93.8 points, down from 94 points in July. Although the mood is better, However, the signs point to job cuts, albeit less severe than in the previous month.

In all key industrial sectors, there were more redundancies than new hires. Among service providers, the indicator has slipped into negative territory. While temporary employment agencies are struggling with sluggish demand, the tourism sector is hiring heavily.