The weakness of the once all-powerful industry Germany has become in these years the worst symptom of chronic disease that suffers the country’s economy. The fierce chinese competitionthe elevated energy pricesthe rise in interest rates and the loss of competitiveness of historic leading brands have had an impact on this vital economic engine in a country that based its success model on high added value exports. After five years of GDP stagnation, every piece of data emanating from the sector is studied with a magnifying glass looking for any shred of recovery. Now, hoping that the big stimulus launched by Berlin return to growth path in 2026the industry has issued its most powerful signal in two years and has spread optimism that it will no longer be a drag on growth.
Los industrial orders Germans increased significantly in December for the second consecutive month, with a rises by 7.8% compared to November, as published this Thursday by the federal statistical body Destatis. This is the largest increase on record for the end of 2023. As in November, this growth is largely driven by large value orders, meaning this increase in orders is likely to exaggerate the underlying trend. Still, even high-volume orders have to be processed at some point, and the underlying figure, excluding large volume ordersalso increased by 0.9% in December compared to the previous month, which represents the fourth consecutive increase. This gives hope that the industry downturn has come to an end for the time being.
“Good news from the German industry: after a 5.7% (revised) increase in order intake in November compared to the previous month, it grew again by 7.8% in December. As expected, this strong increase is mainly due to a new increase in the number of high-volume orders, as occurred in the previous month. These are normally processed with a considerable delay and over a longer period of time, so they will only have a limited impact on production in the coming months,” explains Ralph Solveen, Commerzbank economist in a note for clients, focusing on these big ordersnormally coming from the State and more volatile, which contemplate heavy machinery, aircraft, ships, trains, military vehicles or other large or expensive capital goods.
With this fourth consecutive increase in the figure without large orders, the German bank’s research service expects this metric to soon end its two-year lateral trend. In addition, Solveen highlights as a positive factor, high-volume orders in December were not only concentrated in the “other transport equipment” sector, which includes military vehicles or aircraft and which had sparked optimism when it began to make visible the great investment in defense of the Government; but other sectors, such as machinery manufacturingalso recorded an unusually high number of high-volume orders. “This suggests that large volume orders did not come solely from the Government,” the analyst draws.
Even if total order intake declines again in the coming months, the current figures show two things, Solveen continues: “Firstly, the increase in public spending is reflected in a higher order intake in the industry, which is not surprising. In the long term, this will also lead to increased production. Secondly, ‘normal’ demand also appears to be picking up slightly, as evidenced by the rise in the core figure. This increases the chances that the industry will no longer slow down the economy this yearbut even contribute to the slightly stronger growth expected overall.”
Domestic demand was mainly responsible for the increase in orders to factories, the German Ministry of Economy said in a statement this Thursday. “For several months now, large national orders – in particular those related to public procurement within the framework of the modernization of the German armed forces and orders from the Special Fund for Infrastructure and Climate Neutrality – have caused fluctuations in monthly orders,” the letter reads.
At the same time, “the inflow of orders from abroad has tended to be weaker and subject to greater fluctuations, in view of the trade and geopolitical uncertainties“, the ministry has made public. The figures for German industrial production will be released this Friday, and economists predict a slight decrease of 0.3%.
It is considered that the recovery of industrial activity es crucial for sustainable recovery of Europe’s largest economy, which narrowly avoided a triple recession in 2025. Chancellor Friedrich Merz, who has made reviving growth a priority for his ruling coalition, has described this situation as “unsatisfactory.”
He decline of the industry in the last decadeaccused after the pandemic, is more than documented. In 2024, industrial production in Germany was approximately 4.5% lower than in 2023, prolonging the downward trend that began after the pandemic. At the end of that year, industrial production was at its lowest level since May 2020 (in the midst of the Covid lockdown phase). According to recent studies, German manufacturing industry has lost nearly 245,000 jobs of work since 2019, which roughly corresponds to a contraction of around 4.3% of the industrial workforce.
The Government expects GDP to grow by 1% this year, mainly thanks to increased spending on infrastructure and defense. Some analysts are even more optimistic and Deutsche Bank forecasts growth of 1.5%. Some support is also expected from the delayed effects of the European Central Bank’s (ECB) previous interest rate cuts.
However, risks remain for the German economy, such as changes in US President Donald Trump’s trade stance and the aforementioned increasingly strong competition from China. Furthermore, the country continues to suffer from long-term structural problems, such as excess bureaucracy and the lack of qualified workers. Bundesbank President Joachim Nagel and many economists are demanding that Merz fulfill his promises to reduce bureaucracy and increase competitiveness.
