Cyclical food German industry has hit deep cyclical trough – significant turning point industry joined in cyclical upturn at end 2025. After a uniquely challenging stretch of geopolitical tensions and global economic reordering, we’re now beginning to see significant industrial production rebound. This is an encouraging sign for the nation’s economic landscape. Despite recent challenges, analysts foresee this boom leading to record growth for the industrial market. It will do so across the whole German economy – as a whole – in 2024.
Germany’s industrial production showed the sign of a strong month-on-month increase of 0.8%. This expansion is consistent with a 0.8% year-on-year expansion due in large part to continued strong performance from the automotive industry. This has been a remarkable performance, with three consecutive months of increasing industrial production. It represents a huge turnaround that hasn’t been felt since the recovery after the initial lockdown in 2021.
Factors Behind the Recovery
This week’s increase in new factory orders offered more proof of a rebound in the beleaguered sector. German industry has seen a record high in orders for three months running. This trend signals a strong, positive long-term trend toward increased manufacturing activity. We think this trend is especially heartening. It’s consistent with other economic data pointing to an imminent return of the overall economy to growth.
Several factors contribute to this revitalization. Particularly welcomed are announced cuts in energy costs for major industrial users, taking financial strains off businesses and improving their competitive capacity. In fact, the German parliament has now approved almost 30 military procurement contracts. This decision marks an important and needed upturn in government investment, boosting defense-related industries and creating long-term high-quality job opportunities.
The 2026 budget signed recently into law by parliament continues to finance several key infrastructure and industrial developments. This decision lays the groundwork for that growth even more firmly. Together, these measures will enhance industrial capacity and light a fire under demand. Combined, they create a solid foundation for future economic growth.
Challenges Facing German Industry
Underlying these positive developments, German industry continues to contend with serious structural headwinds that may moderate growth prospects. Geopolitical shifts—including the sharpening role of China in the global economy—pose new challenges. Currently, U.S. tariffs and a stronger euro aren’t doing U.S. Their growth is now being held back by U.S. Simultaneously, this creates a much greater challenge for German producers to access westward opportunities in the international market.
November 2025 marked a surprise 2.5% month-on-month decline in German industry exports, highlighting how damaging these external shocks can be. Imports were up by 0.8% over the same span. This increase reflects the incredibly high demand for the raw materials and components necessary to make production possible. This points to the strength of domestic consumption and shows fragility in the export driven elements of the economy.
Looking Ahead: Optimism for 2026
Looking toward 2026, German industry seems ready for a groundbreaking year. The outlook predicts that bulk orders will become the new normal instead of the exception, indicating long-term demand in multiple sectors. This new trend would bring some much needed stability and predictability for manufacturers who make long-term investments based upon where they plan to expand.
Analysts remain cautiously optimistic about these developments. Plenty of challenges remain, but there is a strong future for German industry. Growing demand, favorable federal policy, and lower energy expenses present a positive picture. The sector is rife with hidden challenges. Stakeholders will closely track indicators that best reflect the performance at home and competitiveness abroad.