Germany’s economic outlook deteriorated sharply in April, according to the latest economic barometer from the German Institute for Economic Research (DIW Berlin). The index dropped by nearly eight points to 82.9, its lowest level in over two years and well below the neutral 100-point mark that reflects average growth expectations.
The decline follows four consecutive months of improvement and highlights ongoing concerns surrounding global trade policy, particularly the uncertainty caused by U.S. President Donald Trump’s tariff decisions and the European Union’s planned responses. “Germany’s economic environment remains strained, primarily due to trade tensions and related unpredictability,” said DIW Chief Economist Geraldine Dany-Knedlik.
Although recent interest rate cuts by the European Central Bank were intended to boost investment, these measures have had limited impact so far. The protracted formation of a new German government has also delayed expected fiscal support, with policy initiatives unlikely to influence growth until later in the year. “While infrastructure spending may provide a lift, its effects won’t be felt in the short term,” Dany-Knedlik added.
The industrial sector remains under pressure, but there are signs of stability, with order intake and production holding steady. Some firms reported greater confidence in their current business situation. However, expectations for future exports and business activity over the next three to six months have worsened. “Ongoing uncertainty is limiting companies’ ability to adapt and plan ahead,” said DIW economist Laura Pagenhardt.
In the services sector, sentiment improved slightly in April, but consumer demand remains weak due to high prices and growing job insecurity. Inflation remains just above the European Central Bank’s 2% target, and unemployment has risen, especially in the manufacturing sector.
“With global trade continuing to stall, Germany’s export-driven economy is unlikely to find external support,” said DIW expert Guido Baldi. “It is increasingly important for Germany to address its domestic challenges, particularly in infrastructure and digital investment.”
Source: DIW Berlin
