Germany’s industrial sector is unlikely to recover in 2026, with production expected to stagnate at best, according to the Federation of German Industries (BDI). The warning was delivered by BDI President Peter Leibinger at the opening of Hannover Messe.
Prolonged decline in output
Industrial production has declined each year since 2022, with the sector now entering a prolonged period of weakness. The association revised its outlook downward, citing a weak start to the year and rising geopolitical risks.
Energy costs and geopolitical risks intensify pressure
The ongoing Iran-related conflict is adding further strain through higher energy prices, supply chain disruptions, and inflationary pressures. According to the BDI, continued shipping disruptions could lead to a fifth consecutive year of declining manufacturing output.
Structural weaknesses limit recovery
The current slowdown reflects deeper structural challenges, with industrial production remaining well below historical levels. Capacity utilization stands at just over 78 percent, signaling limited recovery momentum, while Germany continues to lose ground compared to faster-growing economies.
High costs erode competitiveness
Leibinger emphasized that structural cost pressures, including labor costs, taxation, regulatory burdens, and energy prices, are the main drivers of the downturn. He noted that geopolitical shocks are amplifying, rather than causing, these underlying issues.
The BDI has urged the government to introduce a broad reform package by the summer, focusing on tax relief, investment incentives, and reduced bureaucracy. The association stressed that short-term financial support measures will not be sufficient to restore sustainable growth.