On the basis of the data that is currently available, overall economic development in Germany appears stable as the year 2025 is drawing to a close. Output in the goods-producing sector was up 1.8% in October compared with September (figures adjusted for price, calendar days and season). In addition to the recovery of the industrial sector for the second consecutive month, the construction sector and energy generation also appreciably expanded their output lately. At the same time, production in the energy-intensive industries is showing signs of stabilisation (+0.6%).
New orders in the goods-producing sector increased appreciably as a decline in orders from abroad was more than cancelled out by a surge of domestic orders of almost 10%. This increase is largely attributable to a large-scale order in the field of defence.
However, the most recent sentiment and leading indicators do not give rise to expectations of a profound improvement in the economic situation. According to the ifo Business Climate Index, companies in the goods-producing sector tended to be more content with the current business situation in November, but expectations for the future dampened, particularly in the important automotive industry. One reason for this is likely to be the expected decline in exports, which is weighing on sentiment in the German export industries. For the third consecutive month, the S&P Global Purchasing Managers’ Index also weakened in November, mainly due to unfavourable developments in orders from abroad and another lengthening of delivery times. More evidence of increasing difficulties with the supply of intermediate products can be found in surveys conducted by ifo. The truck toll mileage index for November went down after a strong rise in October, suggesting a weakening of industrial output.
The data on services, which tend to be dominated by domestic demand, also show a mixed picture: retail turnover declined slightly in October, especially due to weaker sales of non-food items, whereas the number of car registrations by private individuals was once again up appreciably. Retail sentiment is not following any clear trend. On the one hand, the GfK Consumer Climate Survey for November suggests an increasing propensity to buy and less propensity to save money, resulting in a slight improvement of the consumer climate towards the end of the year. On the other hand, the HDE consumer barometer for December shows consumer sentiment to be at its lowest level since the beginning of the year; the ifo Business Climate Index dimmed down again in November. According to a survey conducted by the German Retail Federation (HDE), the retail sector has so far been dissatisfied with sales during the important Christmas season. Apart from the generally subdued consumer sentiment, this is probably also due to increasing numbers of foreign online sales platforms.
Overall, the German economy is finding itself in a mixed situation: on the one hand, foreign trade and investment is under pressure from weak demand from abroad, its declining ability to compete and some individual bottlenecks in the supply of certain intermediate products, on the other hand, there are signs of a gradual stabilisation of the domestic economy, which is partly driven by fiscal measures that have recently begun to make themselves felt.
Robust global trade, but regional differences
Global industrial output expanded by 1.0% in September over August, following a slight and temporary decline. Export volumes to Japan, China and other Asian economies, in particular, were up, whereas those to the US and the eurozone remained close to stagnation. Compared to September 2024, global production was up 3.5% at the end of Q3. For the months after that, the indicators are also showing a robust picture: the S&P Global PMI for the global economy inched down 0.3 points to 52.7 in November, staying on a solid growth trajectory. For the services sector, the indicator signals higher activity (53.3 points) than for industry (50.5 points). Sentiment among financial investors has continued to brighten in December in light of global economic development. At the end of the year, an increase of 8.1 to 10.4 points takes the indicator up to its highest level since June 2024. Investors are rating the economic outlook for eastern Europe, Latin America and Asia (excluding Japan) as particularly positive.
Until now, global trade has proven surprisingly resilient. After a slight fall of 0.4% in August, it expanded by 1.1% in September, putting it 5% up in year-on-year terms. However, there are significant disparities hidden behind these figures. The global trade in goods was largely driven by the dynamic development of many emerging economies in Asia. By contrast, development in advanced economies such as the US, Europe and Japan was weaker. A similar picture emerges when looking at the data for October on the RWI/ISL Container Throughput Index: while the overall index went up marginally, from 136.8 to 137.2 points, container throughput in the German and European ports fell significantly for the third consecutive time. Throughput in the Chinese ports saw only a slight decline. Given that the higher US tariffs are unlikely to have reached their full impact, because of stockpiling, delays and implementation and exemptions for freight that had already left the ports at the time they were introduced, observers are expecting a weakening of the dynamism of global trade in the coming months.
You can read more information about the economic situation in December.
