Thursday, 9 April 2026
German companies are entering 2026 in a fragile position, as a combination of external shocks and structural challenges continues to weigh on the economy. After several years of limited or negative growth, the outlook remains subdued, with only modest expansion expected in the near term.
“The resilience of companies will be put to the test once again in 2026,” says Dietmar Gerke, Head of SRM Germany, Austria and Switzerland at Atradius Germany, pointing to the impact of geopolitical tensions and ongoing supply chain disruptions.
Recent forecasts from leading economic institutes suggest growth will remain below one percent, reflecting continued weakness in industrial output and cautious business sentiment. While easing interest rates were expected to support a recovery, global developments have complicated that trajectory.
Tensions affecting trade routes, particularly in the Red Sea, have increased transport costs and extended delivery times, adding pressure to production processes that rely on timely inputs. At the same time, dependence on external suppliers for key raw materials continues to expose manufacturers to volatility. “Against the backdrop of the supply chain issues that have persisted for years, companies’ efforts to diversify their trade routes are now clearly evident,” says Gerke.
Germany’s industrial base remains under pressure. Energy-intensive sectors such as chemicals, steel and metals continue to face higher cost levels compared to international competitors. This has weighed on margins and investment decisions, while also contributing to a broader slowdown in manufacturing activity. Other sectors, including automotive and mechanical engineering, are dealing with weaker demand, trade barriers and rising competition.
Inflation has stabilised compared with earlier peaks, but cost pressures linked to energy and logistics remain. “Depending on how long the conflict persists, price pressures could increase further, while growth prospects may weaken,” Gerke notes.
Households are also contributing to the cautious outlook. Rising costs for energy and everyday goods have affected purchasing power, while uncertainty has led many consumers to delay major spending decisions. “Consumer sentiment has already deteriorated significantly. Many households are saving more and postponing or cancelling larger purchases,” he adds.
From an investment perspective, the current environment presents a mixed picture. While subdued growth and cost pressures are affecting corporate performance, the need to strengthen supply chains and improve efficiency is supporting demand in areas such as logistics, infrastructure and industrial modernisation.
Overall, Germany’s economy is entering another year characterised more by adjustment than recovery. Although its industrial base remains significant, the combination of external risks and domestic constraints suggests that growth will continue to be gradual and uneven, with resilience remaining a key factor for businesses and investors.
