The Economic Situation in the Federal Republic of Germany in November 2025

Economic Stagnation in the third quarter

Germany’s weak economic performance continued into the third quarter. According to the Federal Statistical Office’s flash estimate, price, seasonal and calendar-adjusted GDP remained at the level of the previous quarter. In unadjusted terms, GDP increased by 0.3 per cent compared with the same period last year. In addition, the growth rate for the second quarter was revised slightly upwards, moving from -0.3 per cent to -0.2 per cent.

Domestic demand remained a bright spot, driven in particular by investment in plant and equipment such as machinery, industrial systems and motor vehicles. Despite a pick-up in exports in September, foreign trade is likely to have dampened GDP growth in the third quarter. The effects of recent US trade policy are becoming increasingly evident, placing a burden on German industrial production and exports.

On the production side, the services sector is expected once again to have provided modest support to growth, while value added in both industry and construction likely continued to decline. The Federal Statistical Office will publish detailed third-quarter GDP figures on 25 November.

Current indicators continue to paint a mixed picture as the year draws to a close. The ifo Business Climate Index, the S&P Purchasing Managers’ Index and the ZEW Indicator of Economic Sentiment have all brightened recently – particularly for services – suggesting a possible recovery in the coming months. By contrast, the latest DIHK survey does not yet point to a broad-based improvement in business expectations.

The picture is similarly uneven among consumers. Both the HDE Consumption Barometer and the GfK Consumer Climate Survey fell in November, with slightly more optimistic economic assessments outweighed by negative income expectations. The ifo Business Climate Index for the retail sector, however, edged up in October: companies rated their current situation somewhat more positively, although expectations remain subdued.

Taken together, Germany’s economic situation in the autumn remains fragile. The improvement in business expectations in some areas contrasts with assessments of the current situation, which are still largely viewed as unfavourable. Recent risks of supply bottlenecks – such as semiconductor shortages or Chinese export restrictions on rare earths – do not appear to pose an acute threat to German industry in the short term. However, these risks highlight the dependencies of German industry, particularly the automotive sector, on global supply chains – vulnerabilities that are likely to persist amid ongoing geopolitical tensions.

Global economy remains resilient but trade momentum weakens

As in the two preceding months, global industrial production in August showed a slight uptick, rising 0.1 per cent from July. Stronger output growth in emerging markets made up for declines in advanced economies, particularly in the euro area and Japan. Owing to the strong start to the year, driven in part by front-loaded activity in the US, global production in August was still 3.0 per cent higher than a year earlier. Leading indicators point to a robust outlook for the world economy in the coming months. The S&P Global Purchasing Managers’ Index for the global economy recovered the decline of the previous month, rising by 0.4 points to 52.9 in October and signalling somewhat higher activity than in September. Sentiment improved markedly in the services sector and slightly in manufacturing. However, new export orders fell once again, according to the Purchasing Managers’ Index, pointing to a further weakening of global trade flows. The Sentix Index, which reflects the economic expectations of financial investors, also rose in November, indicating a modest global upturn. Investor sentiment towards the euro area has recently softened again, and the outlook for the United States points to stagnation amid the ongoing government shutdown. By contrast, the Sentix indicators for Japan and for Asia (excl. Japan) increased for the third consecutive month in October.

In contrast, global trade shows signs of weakening. After a strong rise of 1.5 per cent in July, global trade in goods declined by 0.4 per cent in August, influenced by highly volatile US import figures. The RWI/ISL Container Throughput Index suggests that global goods trade weakened further in the autumn. The indicator fell slightly in September, dropping from 137.3 to 136.7 points on a seasonally adjusted basis. Without the sharp increase in container volumes at Chinese ports, the decline would have been more pronounced, as activity in European ports fell significantly. Ship-movement data from the IMF Trade Monitor also point to falling trade activity in October.

The global economic outlook remains broadly unchanged. Following a strong start to the year – supported by inventory build-ups among US firms – both global growth and trade are now showing the expected signs of cooling, particularly in world trade. Although AI-related investment and trade are providing some support, the effective US import tariff is currently estimated by the Yale Budget Lab to be around 18 per cent, the highest level since the 1930s. In addition, heightened economic and trade policy uncertainty continues to weigh on investment. As affected companies are likely to pass on tariff costs to customers only gradually, and global trade flows are still in the midst of realignment, international organisations forecast that the economic effects will emerge only slowly. Consequently, a markedly weaker pace of global trade growth is expected in 2026.

Good trade up in september, driven by EU and US markets

After declines in July and August, Germany’s foreign trade – like its industrial production – moved back into positive territory. At the end of the third quarter, nominal exports of goods and services rose by 0.7 per cent in September from the previous month, seasonally and calendar adjusted. Deliveries in September increased markedly both to EU partners and, for the first time since March, also to the United States. By contrast, exports to China declined. Overall, exports of goods and services fell by 1.6 per cent in the third quarter. Nominal imports of goods and services increased slightly more strongly than exports in September, rising by 0.8 per cent month-on-month. The most dynamic growth came from goods imports originating in the United Kingdom, the United States and China. In quarterly terms, however, total imports fell by 2.0 per cent. Germany’s seasonally adjusted monthly trade surplus remained unchanged in September at €10.3 billion.

Following two consecutive declines, import prices edged up by 0.1 per cent in September on a seasonally adjusted basis, driven by higher costs for energy and raw materials. Export prices also rose by 0.1 per cent, leaving the terms of trade unchanged. In real terms, the increase in both exports and imports is therefore likely to have been slightly weaker.

Corporate reactions to US tariff announcements and adjustments continue to shape the mixed picture among leading indicators. After three monthly declines, foreign new orders rose by 3.5 per cent in September, supported by higher demand from both the euro area (+2.1 per cent) and non-euro-area markets (+4.3 per cent), particularly in other vehicle manufacturing and motor vehicles. However, foreign orders as a whole fell by 4.5 per cent over the third quarter. According to the ifo export expectations, no recovery is yet in sight for German exporters: the indicator fell from 3.4 to 2.8 balance points in October. Declining exports are expected above all in energy-intensive industries, while the automotive sector — a key export industry — is again looking more positively towards foreign markets over the next three months.

Against the backdrop of rising trade barriers and repeated tariff adjustments, companies continue to face significant trade-policy uncertainties and demand fluctuations. So far, there are no signs of a sustained recovery in foreign trade activity.

Production recovers in september - but trend remains weak

In September, industrial output rose by 1.3 per cent month-on-month, adjusted for prices, working days and seasonality. This followed a 3.7 per cent decline in August, largely driven by one-off effects in the automotive industry, including factory holidays and production changes. Industrial production increased by 1.9 per cent on the month, with investment goods recording a particularly strong rise, up 3.8 per cent. Energy output also expanded (+1.3 per cent), while construction activity fell by 0.9 per cent. Overall, however, September’s industrial output remained 1.0 per cent below its level a year earlier (calendar adjusted).

Within industry, automotive production posted a strong rebound of 12.3 per cent as output normalised after the limiting factors in August. Noticeable gains were also recorded in the production of data-processing and optical equipment (+5.1 per cent) and pharmaceuticals (+3.6 per cent). Output in the important sector of mechanical engineering declined (-1.1 per cent), as did metal production and processing (-3.8 per cent), rubber and plastics (-2.7 per cent), and machinery repair and installation (-2.3 per cent). In the construction sector, building projects contracted by 2.2 per cent, while civil engineering rose moderately (+0.8 per cent).

The quarterly picture confirms the overall weakness. In the third quarter, manufacturing output fell by 0.8 per cent compared to the previous quarter. Industrial output decreased by 0.9 per cent, and construction output by 0.6 per cent, whereas energy production continued its positive trend, increasing by 0.5 per cent.

The sharp August decline in output – driven by special factors, namely unusually late factory holidays and production adjustments in the automotive sector – was not offset by the recent growth. The broader trend in the goods-producing sector therefore remains subdued, particularly in energy-intensive sectors such as chemicals, glass/ceramics and paper, all of which are either stagnating or reporting declines in output. Against this backdrop, the September increase cannot yet be interpreted as a turning point.

After four consecutive declines, manufacturing orders rose again in September. Order volumes increased by 1.1 per cent month-on-month, adjusted for price, calendar and seasonal effects, while the August figure was revised up slightly to -0.4 per cent (from -0.8 per cent). Excluding large-scale orders, industrial orders increased by 1.9 per cent on the month. Across the whole of the third quarter, however, industrial orders were still down significantly on the previous quarter (-3.0 per cent).

Domestic orders fell by 2.5 per cent in September following strong growth in August. By contrast, foreign orders rose by 3.5 per cent, driven above all by a 4.3 per cent increase from non-euro-area markets. Orders from the euro area grew by 2.1 per cent.

Across product groups, again in the month-on-month comparison, consumer goods (+6.2 per cent) and, in particular, non-durable consumer goods (+7.2 per cent), recorded strong order growth, mainly from domestic demand. Orders in the important sector of investment goods stagnated (0.0 per cent), while intermediate goods saw a modest increase (+1.4 per cent).

Among individual industries, clothing manufacturers posted exceptionally strong order growth (+40.3 per cent). Orders for electrical equipment (+9.5 per cent) and other vehicle manufacturing (+7.5 per cent) also rose markedly in September, the latter likely boosted by major foreign orders. Declines were observed in demand for energy-intensive products such as metal products (-19.0 per cent), metal production (-5.6 per cent), paper and paperboard (-1.8 per cent), and chemicals (-1.0 per cent).

While August was characterised by a strong rise in domestic orders and a decline in foreign demand, the most recent data show the opposite pattern. No clear trend is therefore discernible at present. Given ongoing geopolitical uncertainties and renewed concerns over the supply of key intermediate goods, the order situation remains fragile.

Retail sales stagnating, sentiment indicators subdued

Price-adjusted retail sales (seasonally adjusted, excl. motor vehicles) remained unchanged in September compared with the previous month. Food retailing recorded a modest increase over the same period, up by 0.3 per cent, while sales of non-food items fell again, dropping 0.8 per cent. Compared with the same month last year, retail sales were up by 0.3 per cent in September, driven by a 0.3 per cent increase in food sales, whereas non-food retailing stagnated (-0.1 per cent). Total retail sales also stagnated on a quarterly basis.

Passenger car registrations rose by 5.1 per cent in October compared with September and showed a strong three-month increase of 10.1 per cent. Relative to October 2024, registrations were still up by 7.8 per cent. Private car registrations rose by 2.7% compared with the previous month, and by 9.2% in the three-month comparison. Compared with October 2024, they were significantly higher (+12.0 per cent). Car registrations by companies and the self-employed also rose in October (+6.3 per cent) and expanded both over the three-month period and year-on-year. Turnover in the hospitality sector declined in August, falling by 1.2 per cent in nominal terms and by 1.4 per cent in real terms over July. Compared with the previous year, hospitality revenues were down by 0.6 per cent nominally and by 3.5 per cent in real terms.  Following a noticeable strengthening of private consumption in the first quarter of 2025 and stagnation in the second quarter, early indicators now show a more muted outlook. According to GfK forecasts, consumer sentiment is expected to deteriorate in November, falling by 1.6 points to -24.1. A significant dampening factor was a sharp drop in income expectations, down by 12.8 points (previous month: +11), to just 2.3 points – its lowest value since March.  The HDE Consumption Barometer also weakened again in November after a marginal improvement in the previous month and has been trending downward since late summer. By contrast, the ifo business climate index for retail (incl. motor vehicles) edged up slightly in October, rising by 0.6 points to -23.2. While assessments of the current situation improved, expectations deteriorated slightly. Both indicators nonetheless remain clearly in negative territory.

Overall, current sentiment data suggest that consumer activity is likely to remain subdued towards the end of 2025. Concerns about job security and inflation, along with scepticism about the economic outlook and the resolution of geopolitical conflicts, are dampening consumers’ willingness to spend. A more meaningful turnaround in private consumption will likely depend in part on an improvement in labour-market conditions.

Inflation rate slightly lower in october

The inflation rate stood at 2.3 per cent in October, slightly below the 2.4 per cent recorded in September. Month-on-month, consumer prices rose by 0.3 per cent. Energy prices once again exerted a dampening effect, falling by 0.9 per cent year-on-year. Food inflation slowed markedly, falling to 1.3 per cent in October.

Core inflation (excl. energy and food) stood at an above-average 2.8 per cent in October and increased by 0.4 per cent from the previous month. Services continued to exert upward pressure on prices, rising by 3.5 per cent year-on-year. Goods inflation eased slightly, up by 1.2 per cent in October; month-on-month, prices of both goods and services increased by 0.3 per cent.

Inflation is expected to remain just above 2 per cent towards the end of the year. While the dampening impact of energy and commodity prices is likely to weaken further, a stronger rise in inflation should be tempered by more modest increases in service prices and moderate wage growth.

Demand for labour remains subdued in the autumn

The usual seasonal upturn in the labour market is once again muted this autumn. Although employment increased by just under 150,000 persons in September compared with the previous month, it declined slightly in seasonally adjusted terms, falling by 20,000. Employment subject to the payment of social security contributions also decreased in August, down by 17,000 persons, and has shown virtually no change in seasonally adjusted terms since the beginning of the year. Unemployment moved sideways in October, edging down by 1,000 persons, while underemployment fell by 14,000. At the same time, take-up of cyclical short-time work declined slightly in August to around 170,000 employees. Short-time work notifications up to 26 October show no signs of any impact from the recently looming semiconductor supply bottlenecks in the automotive sector.

Leading indicators remain subdued heading into autumn. Reported labour demand at the Federal Employment Agency fell slightly again in October. As the employment component weakened, the upward trend in the IAB Labour Market Barometer came to a temporary standstill. However, the modest improvement in the ifo Employment Barometer points to stabilising labour demand in the services sector. Job cuts in industry and trade, by contrast, are continuing unabated. Given the stagnation of GDP in the third quarter and ongoing trade-policy tensions, conditions in the labour market are unlikely to improve in the near term.

Corporate insolvencies continue to rise

According to official statistics, the number of corporate insolvencies rose by 12.3 per cent in July compared with June, climbing to 2,197 filed procedures – the highest monthly figure since October 2013. Compared with the same month a year earlier, insolvencies increased by 13.4 per cent. While the number of affected employees (11,320) fell for the third consecutive month (-15.8 per cent) and is also below last year’s level, expected claims rose again (+48.3 per cent) after declining in June. The persistently dynamic insolvency trend is being driven by several factors, among them the ongoing weakness in the overall economy, structural challenges, rising costs and geopolitical uncertainty.

The IWH insolvency trend for corporations and partnership – methodologically narrower and more up-to-date than the official statistics – recorded 1,553 insolvencies in October, up 5 per cent on the previous month and 2 per cent year on year. The number of affected employees (12,882) fell by 36 per cent from September and was 3 per cent below the level recorded in October 2024. Towards the end of the year, the IWH expects a noticeable decline in insolvency figures, followed by another increase from January onwards.

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[1] This report is based on data that was available as of 13 October 2025. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted for calendar-day and seasonal variations.