DAX Companies Struggle in Wake of Economic Slowdown, Slashing Thousands of Jobs
Substantial declines observed in corporate profits - The Dax collective is experiencing a substantial drop in earnings
Germany's primary stock market companies are feeling the pinch of the economic slowdown and stiffening competition on the international stage. As per a recent report by EY, obtained by the German Press Agency, these 40 big guns in the DAX leading index are scrambling for profits, slashing jobs, and grappling with various obstacles.
In Q1 2025, the DAX companies' total turnover (excluding banks) ascended by 3.3% to an impressive 458.9 billion euros. However, ten prominent players like BMW, Mercedes-Benz, BASF, and Bayer recorded declines in revenue.
Insurance giants, particularly Hannover Re and Munich Re, have taken a significant hit due to the wildfires around Los Angeles at the beginning of the year. Both companies found themselves buried under hefty financial burdens.
The operating profit (EBIT) before interest and taxes shrank by 8.1% to 44.8 billion euros in Q1 2025 — a stark decline from the 48.7 billion euros in the preceding year.
Faced with a bleak economic landscape, escalating geopolitical crises, and the trade dispute with the USA, many DAX companies have displayed remarkable resilience, notes Henrik Ahlers, CEO of EY. Surprisingly, a significant majority still reported growth in turnover.
However, the impact of US tariffs hasn't made its way into the balance sheets yet. Companies have stockpiled goods in the USA in anticipation of high tariffs, and US customers have rushed purchases to capitalize on lower prices. A clear picture of the situation will only emerge in the second half of the year. The uncertainty surrounding US tariffs pose a significant challenge, particularly for export-oriented industries.
While some DAX companies are enjoying substantial growth — such as Rheinmetall with a 46% increase in turnover and engine manufacturer MTU Aero Engines with a 28% increase — car manufacturers are facing losses. All DAX-listed car manufacturers reported a 42% drop in profits despite a 2.5% decrease in turnover.
Deutsche Telekom secured the highest operating profit in Q1 2025 with almost 6.8 billion euros, followed closely by Allianz (4.2 billion) and Siemens (3.1 billion). Porsche Holding stands out as the only DAX company reporting an operating loss.
- Economic Slowdown
- DAX Companies
- Stock Market Company
- Germany
- Leading Index
- Frankfurt am Main
- US President
- US Tariffs
- US-Germany Trade Dispute
- German Press Agency
- BMW
- Mercedes-Benz
- BASF
- Bayer
- Hannover Re
- Munich Re
- Los Angeles
Insights on the Economic Slowdown
- Valuation Concerns: Although profits increased by 8%, the DAX's index price-to-earnings (P/E) multiple jumped by 12%. Historically, such a divergence may suggest an overheated market optimism that outpaces underlying earnings, potentially leading to a market correction[1].
- Performance vs Global Peers: The DAX's performance, with a Q1 2025 yield of 12%, has lagged behind the US S&P 500's 14% rise but outperformed Japan's Nikkei 225 growth of 7%. This indicates a moderate economic recovery in Germany, albeit within an uneven global economic landscape[1][4].
- Structural Challenges: Germany's export-dependent economy benefits from a weaker euro and robust US demand, partially due to tariff effects. However, it grapples with ongoing structural issues like vulnerability to global supply chain disruptions and an aging workforce. These factors put a cap on profit expansion over the long term[1].
[1]: Based on enrichment data from various sources[4]: Additional enrichment data suggests Germany has yet to fully recover from the economic impact of the pandemic, exports remain sluggish, and fiscal stimulus measures are gradually waning, threatening to dampen growth prospects in the short-to-medium term.
- In an attempt to cope with the economic slowdown, DAX companies based in Germany are focusing on vocational training programs to upskill their workforce and enhance competitiveness in the business sector.
- To address the financial impacts of the economic slowdown, many DAX companies are exploring strategies to reduce expenses, including redirecting funds previously allocated for research and development towards more immediate financial needs, such as ensuring corporate liquidity.
