Deutsche Bank Senior Economist Eric Heymann notes that the downturn in Germany’s manufacturing sector has ended, with a projected increase in production of 2 to 3% in 2026. This marks the first rise in industrial production since 2021. Heymann notes that while the recovery is promising, structural reforms are essential for sustained growth.
Fiscal stimulus to drive recovery
“For 2026, we are confident that production in the manufacturing sector in Germany will rise again. An increase of 2 to 3% seems realistic to us. This would be the first increase in industrial production since 2021 and only the second since 2019.”
“There is a chance that the expected increase in production this year can continue in 2027, because fiscal policy will continue to provide impetus then too and could gain broader impact.”
“In the entire manufacturing sector, however, production in 2025 was 15% below its peak (2018). The data shows that the expected recovery in industrial production in 2026 and 2027 would by no means offset the losses of previous years. Without structural reforms, a return to previous production levels is hardly possible.”
“For the entire manufacturing sector, however, there is a chance that the expected increase in production this year can continue in 2027, because fiscal policy will continue to provide impetus then too and could gain broader impact.”
“These figures are an indication that expansionary fiscal policy is increasingly translating into higher orders for industrial companies (not least for defense goods). Improved tax depreciation conditions for investments could also provide impetus in 2026. Furthermore, (energy-intensive) companies are being relieved on the cost side by government support measures (e.g., temporary industrial electricity price, federal subsidies for grid fees).”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/germany-recovery-in-manufacturing-expected-deutsche-bank-202602061534
