COLOGNE (dpa-AFX) – At the turn of the year, confidence is prevailing in the German economy at least in one point for the first time in years: 19 of 46 associations surveyed by the employer-related Institute of the German Economy (IW) expect higher production in the new year than in 2025. Only 9 of the associations expect a decline in business.
However, no strong economic momentum can be derived from the slightly positive balance, writes the IW. This also shows the associations’ expectations when it comes to investments: 11 associations that expect more investments than 2025 are compared to 14 associations that report a decline.
Many problems remain
“Anyone who hoped for a quick and comprehensive end to the economic crisis will also be disappointed in 2026,” says IW director Michael Hüther, summarizing the results of his company’s annual survey of large industry associations. “That’s not surprising, because the general conditions – uncertainty, weak trade, expensive location – have changed little.”
At the turn of the year 2025/2026, 18 of the 46 participating associations stated that the current situation in their economic sector was worse than a year ago. At least there is less pessimism than in the previous year’s survey: at the turn of the year 2024/2025, 31 of the 49 associations surveyed rated the situation in their industry as worse than the year before.
Confidence among service providers – a lot of skepticism in the industry
The optimists in the current survey can be found primarily in the service sector, which includes banks and insurers. The construction industry and the real estate sector are also seeing positive developments compared to the end of 2024.
In industry, aircraft and spacecraft construction alone is expecting a significantly better financial year in 2026 – an industry that is likely to benefit from increasing defense spending. Shipbuilding, mechanical engineering and the electrical industry, among others, are expecting slightly higher production. For example, the automotive industry, paper industry and textile industry are preparing for worse business.
The Cologne-based institute explains that high costs in Germany as a location for international competition are particularly difficult for industry. There are also trade barriers and customs barriers in global business.
The bottom line is poor employment prospects
According to the IW survey, the Job cuts continue in the new year. 22 of the 46 associations expect a reduction in their workforce in 2026. Only 9 associations expect an increase in employees, 15 expect stable employment.
Industry associations in particular expect staff to be cut in the new year. Only those Pharmaceutical industryaircraft and spacecraft construction as well as shipbuilding and marine engineering intend to create new jobs.
Special effects will drive growth in 2026
Economic forecasts for 2026 assume that the German economy will at least improve somewhat after three lean years. A 0.8 percent to 1.3 percent increase in gross domestic product (GDP) is expected. The growth is likely to be driven largely by special effects: government spending billions on infrastructure such as roads and rails as well as on defense. In addition, more public holidays fall on a weekend in the new year, so there are more working days than in 2025.
“The German economy is currently stabilizing at a lower level,” says IW director Hüther. “If we want to return to growth, politicians still have a lot of work to do.”/ben/DP/he