Konjunktur: Wirtschaftsministerium erwartet Ende der Sonderkonjunktur

In Germany, government officials sense a softening of the recently strong economic momentum. The Federal Ministry of Economics (BMWE) reported on Monday that the special economic stimulus to energy-intensive industries, driven by increased overseas demand during the conflict in the Middle East, appears to be weakening by mid-year.

The report also noted that indicators for private consumer activity, amid persistently high energy prices, suggest a slowdown in momentum. The ongoing low water effects from the unresolved Middle East conflict and energy price increases are expected to dampen the economy in the current quarter. Despite the challenges from the Iran war, the economy performed well in spring, with the Gross Domestic Product (GDP) increasing by 0.3 percent from April to June due to higher exports.

Many research institutes have revised their 2026 GDP growth predictions upwards, with the Munich Ifo Institute forecasting a 1.4 percent increase. The BMWE is now adding some water to the wine, stating that a slight economic slowdown can be expected by mid-year following the clear recovery in the first half of 2026. However, the ministry acknowledges that mood indicators such as the Ifo Business Climate Index, the ZEW Economic Sentiment, and the S&P Purchasing Managers' Index have recently brightened significantly.

Nevertheless, these optimistic sentiments are not reflected in the latest economic indicators. The ministry points to industrial production, which declined in July contrary to the positive outlook, as the energy-intensive industries' boost appears to be losing steam, apart from the automotive sector, whose production was also limited due to a temporary factory shutdown.