German industrial production edged higher in April for the first time since the outbreak of war in the Middle East, official data released Tuesday showed, though analysts warn the single-month gain masks a far grimmer underlying picture for Europe’s largest economy.
According to Germany’s federal statistics office, Destatis, output rose 0.4% in April from the previous month, driven mainly by construction.
The reading ends a losing streak dating back to last November, yet few are treating it as a turning point.
According to Carsten Brzeski, Global Head of Macro at ING, in a research note published Tuesday, the April figure is “simply too little” with output effectively stagnating across the first four months of 2026 and still running roughly 12% below pre-pandemic levels.
The headline number drew support from an encouraging jump in construction activity, which grew 2.4% month-on-month.
Exports also delivered an upside surprise, rising 0.9% from the previous month, up from 0.5% in March, though the trade surplus was little changed as imports rose even faster.
What looked, only months ago, like the foundation for a promising year, with improving sentiment, rising order books and a major fiscal injection into defence and infrastructure under Chancellor Friedrich Merz, has once again given way to doubt.
The Iran war, the energy price squeeze and a sombre outlook
The backdrop to April’s data is stark.
Germany remains one of Europe’s largest net importers of energy, with roughly 6% of its oil imports coming from Middle Eastern countries, according to ING analysis, while energy-intensive industries, employing close to one million people, account for around 17% of industrial gross value added.
The conflict has sent energy prices spiralling, with Germany’s inflation rate climbing to 2.9% year-on-year in April, the highest since January 2024, driven by energy product prices that were over 10% higher than a year earlier.
In April, the German government halved its growth forecast for 2026, now projecting GDP expansion of just 0.5%.
Tuesday’s production data followed a deeply discouraging orders report published a day earlier. New manufacturing orders fell 3.8% in April month-on-month, according to provisional Destatis figures.
The automotive sector was among the worst affected, with orders falling by more than 5%, while electrical equipment and machinery also posted sharp declines. Foreign orders dropped by over 4%, and domestic orders were down nearly 3%.
According to ING’s Brzeski, what had been a boom in industrial orders after last summer, with four consecutive months of over 4% monthly gains, swung sharply into reverse in 2026, with orders falling more than 2% on average every single month through April.
The momentum from domestic defence stockpiling and supply chain pre-ordering has, for now, evaporated.
Given the extent of the damage to production capacity in the region and the backlog from energy and commodity supply bottlenecks, any normalisation is expected to take considerable time, according to Germany’s Federal Ministry for Economic Affairs.
Brzeski concluded that the anticipated industrial rebound of 2026 has not materialised, describing the mood in a note as one of “high hopes and broken dreams,” a theme he expects to persist in the weeks ahead.
