Germany: Factory recovery prospects – Commerzbank

Commerzbank’s Dr. Ralph Solveen notes that German industrial output rose 0.9% in May versus April, leaving April–May production slightly above the first-quarter average. With manufacturing sales outperforming output and energy prices having spiked only temporarily, he argues there is a growing likelihood that the German economy avoided contraction in spring and could resume recovery later in 2026 as Oil prices fall.

German industry shows tentative improvement

"Industrial output rose by 0.9% in May compared with the previous month. As a result, output in April and May was slightly above the Q1 average. Since sales have performed even slightly better, there is a growing likelihood that the German economy did not contract in the spring, despite the massive temporary spike in energy prices."

"Once again, German industry has reported quite encouraging figures: Following yesterday’s report of a significant increase in industrial orders, industrial output in May was also higher than in April, even though the 0.9% increase was slightly smaller than that seen in orders. However, this is not yet enough to suggest that the sideways trend in production has come to an end."

"After all, production in April and May was, on average, 0.5% higher than in the first quarter. In addition, manufacturing output – that is, production excluding construction and energy production – performed significantly better than production in this sector. Thus, the currently available figures certainly offer hope that the German economy did not contract in the second quarter, despite the massive rise in energy prices due to the war in Iran and the increased uncertainty."

"In the second half of the year, it is likely to resume its recovery in light of the recent sharp drop in oil prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)