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Weak export and industrial data has cast doubt on the strength of Germany’s recovery from years of stagnation, even before any shock from the recent surge in energy prices.
The “entire German economy” had a “very weak start to the new year”, said ING’s global head of macro Carsten Brzeski on Tuesday after trade data for January showed a 2.3 per cent monthly fall in exports and 5.9 per cent drop in imports.
The larger than expected declines came a day after Germany’s statistical office reported that output in its all-important manufacturing sector fell for the second consecutive month in January.
The data does not take into account any shock from the recent rise in oil and gas prices triggered by the Iran war, raising questions about whether Europe’s largest economy can bounce back in 2026.
“Our optimism about Germany’s growth prospects has taken a hit,” Brzeski wrote in a note to clients, adding that the country’s manufacturers were hit by US tariffs and tough competition from Chinese rivals.
Order intake plunged 11 per cent in January due to a drop in volatile large-ticket orders. “The decline in industry was very broad-based,” Goldman Sachs economists said.
January’s sharp fall in imports could point to underlying weaknesses in the domestic economy, although it meant Germany’s trade surplus shot up by 21 per cent to €21bn.
“A fall in imports poses an upside risk to headline GDP growth this year,” wrote Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.
Economists had hoped that Chancellor Friedrich Merz’s multibillion-euro investment package would help Germany to finally return to higher growth this year after a multiyear recession. In 2025, the country’s GDP expanded for the first time since 2022, eking out 0.2 per cent growth.
A stronger than expected performance in the final three months of 2025, when GDP expanded by 0.3 per cent compared with the previous quarter, fostered optimism that growth could improve to 1 per cent this year.
Germany’s closely watched Ifo business climate index rose slightly more than expected in February but investor morale captured by the ZEW indicator fell unexpectedly.
The chance of higher interest rates in the wake of the recent energy price shock could create another headwind.
Estonia’s central bank governor Madis Müller said on Tuesday that it was more likely that the “next change” in the European Central Bank’s policy rates would be “an increase”. However, he also stressed at an event in Vilnius, Lithuania, that policymakers should not rush to action. The ECB will next decide borrowing costs on March 19.
However, BNP Paribas economists have argued that Germany’s increased government spending will lift it out of economic gloom.
“While we remain optimistic about the growth outlook for the year as a whole, recent data are a reminder that the recovery process is likely to be non-linear,” BNP economist Paul Hollingsworth told the FT on Tuesday, adding that “renewed energy price headwinds resulting from the Middle East conflict are another source of downside risk”.
Merz last year opened the door for a €1tn fiscal stimulus over the next decade by excluding large parts of the defence budget from the country’s tight constitutional debt brake and earmarking €500bn for additional infrastructure investment.