SadaNews – Upcoming data from Germany over the next few days is expected to shed light on whether the largest economy in Europe is on the verge of a meaningful recovery, or still shackled by Donald Trump’s tariffs and chronic internal deficiencies.
The anticipated releases will include the prominent economic sentiment index from the Ifo Institute, along with a more detailed look at the country’s performance in the fourth quarter, which exceeded expectations. Monthly updates on consumer confidence and unemployment will also be released.
The Return of German Industry to Growth
Analysts expect that the Ifo indicators for forecasts and companies’ assessments of current conditions will see a slight increase on Monday, in line with the improvement already observed in purchasing managers’ surveys. Besides surpassing expectations, those surveys brought long-awaited news, as Germany’s manufacturing sector returned to growth for the first time since 2022.
The Federal Statistical Office is expected to provide broader details on Wednesday about the reason for the 0.3% advancement in GDP at the end of 2025, having initially attributed this performance to household and government spending. The German central bank also pointed to growth in the industrial sector and notable strength in the construction sector.
Germany’s Spending on Infrastructure and Defense
The recovery of the industry is seen as a crucial factor to help Germany shed years of stagnation or production contraction. Alongside the purchasing managers’ indices, factory orders jumped in December, suggesting that the large sums Germany is spending to rebuild its infrastructure and bolster its military capabilities are beginning to show effects.
An industrial recovery would be welcomed by Chancellor Friedrich Merz, who is struggling to convince Germans of his economic vision and is under pressure from business leaders to fulfill his promises to reduce bureaucracy and enhance competitiveness.
Bloomberg Economics Experts’ Opinion:
“We do not expect a significant economic acceleration in Germany in the near term, as we foresee growth of 0.2% in the first quarter of 2026 and 0.3% in the second. An increase in public spending on infrastructure and defense is likely to provide a bigger boost in the second half of 2026, raising quarterly GDP growth to 0.4%. This would leave the annual growth, adjusted for the number of days in the year, at 0.8% in 2026, compared to 0.3% in 2025.”
-Martin Admer, Economic Analyst
Adding to the already unclear landscape is the possibility that Christine Lagarde may not complete her term at the helm of the European Central Bank, after the institution successfully curbed inflation and paved the way for a recovery in the eurozone economy.
A potential early exit for Lagarde – who is scheduled to speak in Washington on Monday and before the European Parliament on Thursday – could be a distraction for Merz, who may need to make a decision sooner than expected about whether to push for the appointment of the first German president of the European Central Bank.