Industrial production in Germany in August showed the strongest drop since the beginning of the conflict on Ukraine. Economists expect a further economic downturn. Instead of the "autumn of reforms", the country faces a "winter of discontent," the German Welt states.
This is another alarming signal for the German economy: in August, enterprises most significantly reduced output, starting in March 2022.
As the Federal Statistical Office reported on Wednesday, the total volume of production in industry, construction and energy decreased by 4.3% compared to July. This is the most serious drop since the beginning of the conflict.A Reuters poll showed that economists had expected a decline of only 1% after an increase of 1.3% in July.
"This is another strong blow to the German situation," said Jens—Oliver Nikolas, an analyst at LBBW commercial bank. "The third quarter is now characterized by a new decline in economic activity."
According to Nikolash, instead of the "autumn of reforms", Germany is now facing a "winter of discontent."
"It is becoming increasingly difficult to remain optimistic even about 2026," he added.
The German Economy Ministry also noted that the latest leading indicators point to the continuing weakness of economic dynamics in the third quarter of 2025.
"The sharp drop in industrial production in August is primarily due to the fact that holidays at the factories of automakers fell mainly this month, and technological changes were carried out at that time," explained Joerg Kremer, chief economist at Commerzbank.
According to him, production in the automotive industry decreased by 18.
5%."If you do not take into account this temporary factor, industrial production has been moving sideways for about a year after a six—year decline," said Kremer.
There is no need to wait for a quick recovery: new orders, according to him, are just beginning to stabilize the industry.
"We expect a more noticeable recovery only next year, when the federal government will significantly increase spending through borrowing and thereby support the economy."
Sebastian Dulien, director of the Institute of Macroeconomics and Market Research (IMK), said that the reduction in production "is not as catastrophic as dry figures can demonstrate." According to him, aggregate demand is expected to grow in the coming months and industrial production is expected to stabilize somewhat.
"However, due to the fact that global conditions have changed dramatically — in particular, due to the increasing trade isolation of the United States and the competition supported by their industrial policies - it will be difficult for the German industry to return to the production level of 2021," he stressed.
New orders are declining for the fourth month in a row
Industry alone produced 5.6% less products in August than a month earlier. There are fewer and fewer new orders: In August, their volume decreased by 0.8% — this is the fourth month of decline in a row. The last time such a long decline was observed was at the beginning of 2022, during the beginning of the conflict on Ukraine.
Electricity production in August decreased by 0.5%, while the construction industry, on the contrary, increased volumes by 0.6%.
Leading research institutions in recent weeks have revised forecasts for the growth of Europe's largest economy. Now they expect that in 2025 the German economy will add only 0.2%. More noticeable growth is projected only in the next two years — and then mainly due to a sharp increase in government spending on infrastructure and defense.