German Economy Shows Early Signs of Slowing Mid-Year

Germany’s economic momentum appears to be softening as mid-2026 approaches, according to the Federal Ministry of Economics (BMWE). While the country’s growth had been relatively robust in the first half of the year, driven by strong export demand amid elevated energy prices tied to geopolitical tensions in the Middle East, signs of a slowdown are emerging in both industry and domestic consumption sectors. The ministry’s latest monthly report highlights a decline in energy-intensive manufacturing, which had benefited from heightened foreign demand, while high energy costs and lingering uncertainty—including the unresolved conflict in the Middle East and persistent water shortages—are exerting downward pressure on growth in the current quarter. The gross domestic product (GDP) expanded by 0.3% in the April–June period, largely due to export-led growth, but recent data suggests a waning in this dynamic. Industry production fell in July, with the automotive sector hit by temporary production disruptions, while energy-intensive industries are also losing momentum. Despite improved business sentiment, as reflected in rising indices such as the Ifo Business Climate Index and the ZEW Economic Expectations Survey, these indicators do not yet translate into stronger underlying economic performance. The ministry notes that while export-oriented sectors remain resilient, domestic consumption growth is being moderated by sustained high energy prices and broader economic uncertainties.