Fresh Signs of Trouble in Germany’s Economy
Germany’s manufacturing sector, once hailed as the powerhouse of Europe, is showing deeper signs of strain.
According to new data, factory orders fell by 0.8% in August, extending a worrying four-month streak of declines.
The latest figures deal a fresh political and economic setback to Chancellor Friedrich Merz, who has been struggling to reignite growth amid weak exports and soft global demand.
Economists had expected a rebound — instead, orders plunged again, raising fears that the slowdown in industrial production could drag Germany closer to recession.
Exports Slump While Domestic Demand Holds Up
The Federal Statistics Office reported that export orders dropped by 4.1%, driven by falling demand both inside and outside the eurozone.
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Orders from euro area countries fell by nearly 3%.
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Orders from non-euro trading partners fell by over 5%.
Domestic orders, however, offered a small ray of hope, rising by about 4.7%, showing that local industries and consumers are still generating some activity despite weak international conditions.
The broader picture, though, remains grim: industrial demand is softening, and factories are cutting back on new projects as uncertainty grows.
A Political Challenge for Merz
For Chancellor Merz, the data couldn’t come at a worse time. His administration has built much of its recovery narrative on reviving industrial strength and boosting exports, two pillars of Germany’s traditional economic model.
The persistent drop in factory orders now threatens that story — and with it, public confidence in the government’s handling of the economy.
Analysts say Merz will likely face growing pressure to introduce stimulus measures, such as tax incentives for manufacturers or energy cost relief, to cushion the slowdown.
What’s Behind the Decline
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Global Demand Weakness: Slow growth in key markets like China and the U.S. has reduced appetite for German exports.
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High Energy Costs: Persistent energy price pressures continue to make production expensive.
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Supply Chain Adjustments: Global firms are diversifying away from dependence on Europe’s manufacturing hubs.
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Rising Interest Rates: Tight credit conditions are limiting new investment orders across the EU.
These structural issues have left Germany vulnerable to external shocks, despite its advanced manufacturing base.
Outlook: Can Germany Bounce Back?
Economists warn that without targeted intervention, the downturn could deepen into the final quarter of 2025.
Some, however, see domestic resilience and public sector investment as potential stabilizers in the medium term.
Still, for Merz, the message is clear — restoring confidence in Germany’s industrial machine will take more than promises. He’ll need tangible results before markets and voters regain faith in the so-called Made in Germany miracle.
