Germany: Industrial slump deepens with Middle East shock – ING

ING’s Carsten Brzeski highlights that German industrial production weakened further in March, with a 0.7% monthly decline leaving first-quarter output more than 1% below late 2025 levels. He notes that the war in the Middle East, soaring energy prices and a sharply narrower trade surplus increase the risk of a downward revision to Germany’s first-quarter GDP growth.

Industrial data signal renewed growth risks

"German industrial production weakened further in March as the war in the Middle East started to take its toll. The just-released industrial data for March illustrate the struggle of German industry to gain momentum in the first quarter of the year. Not only was the February drop revised downwards, with a 0.7% month-on-month decline in March, but industrial production in the full first quarter was more than 1% weaker than in the final quarter of 2025."

"The March drop was mainly driven by falling production in manufacturing. On a more positive note, activity in the construction sector rebounded somewhat in March. At the same time, export growth slowed to 0.5% MoM, from 4.7% in February."

"As industrial production is down on the quarter and the trade surplus narrowed significantly in March, a downward revision to the first estimate of first-quarter GDP growth has become likely."

"It needs at least 1% growth in the second quarter to bring industrial production back into positive territory. A development that currently looks unlikely."

"All in all, this morning's industrial production data suggests that the stuttering of one of Germany's most important growth engines worsened with the start of the war in the Middle East. Given that energy prices continued to soar in April and risks of supply chain disruptions increased, any near-term improvement in industrial production looks very unlikely."