More than three-fourths of German business leaders expect increases in revenue (78%) and profits (75%) in the year ahead, up 9% and 16% respectively from 2023, according to J.P. Morgan's fourth annual Germany Business Leaders Outlook survey.

At the same time, while the labour shortage continues in Germany, business leaders' staffing expectations remain similar to 2023, with 43% planning to add headcount in the year ahead.

The survey of more than 250 C-suite executives from German midsize companies found that at the same time, local leaders are acutely aware of the tense macroeconomic situation, with half (50%) expecting a recession in 2024. Cautious optimism is central amid persisting economic uncertainties.

More than half have an overall positive outlook on the global (58%) and national (59%) economies. Additionally, 67% expect their capital expenditures to increase significantly this year, up 11% from 2023, and 70% expect their credit needs to also increase in the year ahead, up 6% from 2023.

“It's crucial to recognise the dual nature of the sentiments expressed by German business leaders-a balance between optimism and caution-especially with the economic uncertainties continuing into 2024”, said Bernhard Brinker, head of commercial banking, DACH Region, J.P. Morgan. “This ambiguity is emblematic of the complex landscape they navigate, weighing positive indicators against potential challenges,”

Stefan Povaly, head of Germany, senior country officer, J.P. Morgan said, “While the German business community continues to be simultaneously confronted with many different challenges, they have staunch confidence in their own strengths coupled with the resilience and innovative power of their industries.”

While expecting to grow in the year ahead, German business leaders remain cautious given the rising costs to do business. Local executives cited rising interest rates (29%) as the top significant challenge they're facing in the year ahead, closely followed by uncertain overall economic conditions (28%), the adoption of artificial intelligence (AI) (28%), navigating the labour environment (27%), as well as global unrest and geopolitical concerns (27%).

Meanwhile, persistently high inflation rates remain a pressing concern for German business leaders, with nearly three-quarters (73%) reporting experiencing rising costs due to inflation, up 10% from 2023.

Despite continued economic obstacles, German business leaders are looking for ways to generate growth and stay competitive. When surveyed about their business plans over the next 12 months, business leaders plan to expand their businesses by: Introducing new products and services (50%, up 13% from 2023), introducing new distribution channels (50%), up 9% from 2023, expanding into new international (39%) and domestic (41%) geographical markets, down 4% from 2023.

The study also found that 2023 was the year in which AI-specifically generative AI-made its breakthrough. German business leaders realise the importance of embracing this technology if they are to remain successful in the long term, with 82% considering using or already using AI tools.

Of those currently using or considering adopting AI, the most frequently mentioned business use include product development (56%), human resources and training (47%), business operations (45%), financial management (44%) and costing (46%).