German Economy Shows Signs of Stabilization in Early Q4, but Outlook Remains Cautious

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Germany’s economy opened the fourth quarter of 2025 on a stronger footing, supported by stabilization in industrial output and a rebound in domestic demand, according to the latest monthly report from the Federal Ministry for Economic Affairs and Climate Action.

In October, industrial production held steady near last year’s level, declining just 0.1% year-on-year. Despite persistent headwinds from weak foreign orders and ongoing shortages of intermediate goods, domestic orders for capital goods rose noticeably, suggesting a more stable foundation for the sector.

Export performance also remained relatively robust, staying at a six-month high thanks to improved demand from other EU countries. However, the ministry cautioned that the overall export sector has not yet returned to full recovery and continues to feel the pressure of a weaker global environment. “Towards the end of the year, the German economy remains caught between a challenging international setting and a gradual internal stabilization,” the ministry noted.

While recent hard data shows tentative improvement, sentiment indicators provide a more subdued view. Both business expectations and consumer confidence slightly deteriorated in recent weeks, highlighting continued uncertainty around the economic outlook.

Nonetheless, rising global tariffs are likely to continue weighing on the German export outlook into early 2026. For now, policymakers are pinning hopes on resilient domestic demand to maintain momentum through the remainder of the year.

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