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MADE
IN GERMANY
We outline a selection of economic and industrial trends and forecasts for Germany for manufacturers.
“ After a challenging period, the German economy is on the path to recovery supported by order increases in its machine tool industry.”
Renowned for its industrial prowess in sectors such as automotive, machinery and chemical, Germany boasts a strong engineering and labour force. It also has a strong service sector, with a significant focus on financial services, IT and tourism. Germany is Europe’ s most industrialised country, and its economy is well diversified. A strong EU powerhouse, and traditionally the largest exporter in the EU, its economy follows a social market economic model.
However, factors such as geopolitical developments( including the Russia-Ukraine war), rising trade tensions, supply restraints and weak global goods demand in the wake of the COVID-19 pandemic have challenged Germany’ s economy in more recent years. Germany’ s industry has also been impacted by rising overseas competition( particularly in the automotive sector), high energy costs, persistently elevated interest rates and uncertain economic prospects. Energy commodity prices picked up again sharply in August and September, affecting inflation rates.
The German economy is likely to grow only slightly in the third quarter of 2026, according to the current issue of the Bundesbank’ s Monthly Report. In general, however, the German economy will not stray from its path to recovery, according to the economists. This is because, they said, the slower pace of the recovery stems from temporary factors.“ Catch-up effects should come into play once these factors subside,” said the Bundesbank report.
Economic challenges and opportunities
Germany’ s automotive industry has traditionally been a key driver of its economy. However, several German automotive companies are now restructuring due to shrinking profit margins; plunging sales in China; fierce competition from domestic Chinese electric vehicle( EV) makers; high domestic labour and energy costs; U. S. tariffs and the expensive transition to electric and software-defined vehicles.
“ The German economy has been hit with major shocks in recent years, with these adverse effects exacerbated by weak underlying productivity growth. The energy-price shock in mid-2022 and rapid monetary tightening that was required to contain inflation contributed to deliver two years of negative growth during 2023 – 24,” commented the
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