Industrial production has faced repeated setbacks this year. In August, it was the low water levels of the Rhine, a key transport route for the German economy. In that respect, today’s figures are remarkably good, not to mention the strong figures for construction. So, the German economy has not, after all, slipped into the mud of low water. And the trend shows that – albeit with significant fluctuations – order books are continuing to fill up, especially in the manufacturing sector. The outlook is particularly positive in the ‘Other Vehicle Manufacturing’ sector, which is benefiting from rising defence spending, as well as in the key mechanical engineering sector and the so-called digitalisation sector. The latter encompasses data-processing equipment as well as electronic and optical products such as lasers, which are required for the manufacture of semiconductors. This development shows that the boom surrounding AI and data centres has also taken hold in Germany. Against this backdrop, production is set to rise and, hopefully, the joy of growth will soon return to this country.

Dr Sebastian Wanke

At 3.8 per cent, inflation in the eurozone has risen to its highest level in three years, exceeding expectations. The protracted energy price shock remains the key driver. Despite rising supplies from the Gulf region, crude oil prices are showing little sign of easing. Processing capacities, which have been reduced due to war, have further exacerbated shortages of refined products, particularly diesel. Meanwhile, high gas prices are increasingly being felt by European consumers. Together with households’ medium-term inflation expectations picking up again, this strengthens the case for a further ECB interest rate hike. However, the situation remains incomparable to that of 2022. Core inflation remains remarkably stable at a moderately elevated level, whilst wage growth remains contained. This gives the ECB the leeway to act prudently. A moderately restrictive key interest rate is likely to remain the appropriate response for the time being.

Stephanie Schoenwald

Looking at the sentiment indicators right now, it’s hard to believe what you’re seeing. Despite adverse conditions - including very high fuel and natural gas prices as well as rising interest rates - the business climate continued to improve in September, and the Purchasing Managers’ Index is also showing increasing growth. Fortunately, the German economy is currently not only benefiting from the fiscal stimulus but is also able to participate in the global boom in investments in data centers and electrification. Strong wage growth is also helping to stabilize private consumption. Given the once again well-filled order books, we expect the economic upturn to gain even more momentum next year. However, this depends on an increase in energy flows from the Gulf region. Since sentiment indicators underestimated growth in the spring, we wouldn’t be surprised by the opposite outcome at this point: There may be a slight disappointment when the Federal Statistical Office announces the gross domestic product for the third quarter at the end of October.

Dr Philipp Scheuermeyer

The German economy weathered the energy price shock remarkably well in Q2. Furthermore, growth figures for the first quarter have been revised slightly upwards, so we can now expect a number of upward revisions to economic forecasts. One reason for the positive growth reported in the flash estimate was surprisingly strong exports. In the manufacturing sector, a number of indicators – such as new orders and turnover – are consequently pointing significantly upwards again. Private consumption also remained broadly stable, despite the loss of purchasing power, as reflected in retail turnover. Finally, it is encouraging that business surveys also improved significantly in July, led by the Purchasing Managers’ Index. Nevertheless, the crisis is not yet over, as the Strait of Hormuz remains blocked and a stable ceasefire is not yet in sight. Furthermore, the ongoing drought could still restrict industrial production somewhat this summer due to supply bottlenecks.

Dr Philipp Scheuermeyer

The May production data, once more, reflect the imbalances caused by the war in Iran, making the data difficult to interpret. The effect of bringing forward purchases due to fears of supply shortages is countered by caution stemming from concerns about the future. More importantly, however, it has to be said that the recovery has already begun behind the scenes. This is evident in the manufacturing sector’s order intake, which – even when excluding major contracts – is clearly trending upward. This will soon fuel production in this country over the longer term, especially once oil and gas can again pass freely through the Strait of Hormuz and reforms provide additional momentum.

Dr Sebastian Wanke

As the situation in the Middle East stabilises, the inflation shock is also subsiding. Fuel prices are falling again. Whether consumer price inflation will continue to decline in the coming months remains to be seen. This is not only due to the impending termination of the fel tax rebate. The situation in the Persian Gulf remains fragile and gas prices have not followed the rapid decline in oil prices. Furthermore, the current trend of very favourable food prices could soon come to an end. The high fertiliser prices of recent weeks and the looming severe El Niño are likely to have a delayed impact.

Stefanie Schoenwald

The preliminary results for the Composite PMI for June show a further slight deterioration in business sentiment in Germany, driven by the services sector. This continued downturn suggests that the war in Iran is just one factor weighing on business sentiment. It is also noteworthy in this context that sentiment among French businesses improved significantly in June. There is no question that the end of the Iran war and the decline in oil prices will have a positive impact on the German economy. However, today’s figures suggest that this alone will not be enough to trigger a renewed acceleration later in the year. Fiscal stimulus and further reform efforts are necessary for a lasting improvement in sentiment.”

Dr Dirk Schumacher

Following several very strong quarters, US economic growth is cooling off as expected, reaching an annualised rate of 1.4% in the fourth quarter. The government shutdown between October and mid-November throttled momentum through reduced government spending and delayed consumption effects. All in all, 2025 reflects a solid growth rate of 2.2%, which is remarkable given the high level of political uncertainty and dynamic policy shifts. A key driver was the high level of investment in Artificial Intelligence, which remained largely unfazed by economic policy turbulence throughout 2025. In parallel, private consumption continues to support growth despite dampened sentiment. A decisive factor for the future trajectory will be whether the clouded household confidence begins to weigh more heavily on spending behaviour.

Dr Stephan Bales