The Economic Situation in the Federal Republic of Germany in December 2025

Economic stabilisation towards the end of the year

On the basis of the data that is currently available, overall economic development in Germany appears stable as the year 2025 is drawing to a close. Output in the goods-producing sector was up 1.8 per cent in October compared with September (figures adjusted for price, calendar days and season). In addition to the recovery of the industrial sector for the second consecutive month, the construction sector and energy generation also appreciably expanded their output lately. At the same time, production in the energy-intensive industries is showing signs of stabilisation ( +0.6 per cent).

New orders in the goods-producing sector increased appreciably as a decline in orders from abroad was more than cancelled out by a surge of domestic orders of almost 10 per cent. This increase is largely attributable to a large-scale order in the field of defence.

However, the most recent sentiment and leading indicators do not give rise to expectations of a profound improvement in the economic situation. According to the ifo Business Climate Index, companies in the goods-producing sector tended to be more content with the current business situation in November, but expectations for the future dampened, particularly in the important automotive industry. One reason for this is likely to be the expected decline in exports, which is weighing on sentiment in the German export industries. For the third consecutive month, the S&P Global Purchasing Managers’ Index also weakened in November, mainly due to unfavourable developments in orders from abroad and another lengthening of delivery times. More evidence of increasing difficulties with the supply of intermediate products can be found in surveys conducted by ifo. The truck toll mileage index for November went down after a strong rise in October, suggesting a weakening of industrial output.

The data on services, which tend to be dominated by domestic demand, also show a mixed picture: retail turnover declined slightly in October, especially due to weaker sales of non-food items, whereas the number of car registrations by private individuals was once again up appreciably. Retail sentiment is not following any clear trend. On the one hand, the GfK Consumer Climate Survey for November suggests an increasing propensity to buy and less propensity to save money, resulting in a slight improvement of the consumer climate towards the end of the year. On the other hand, the HDE consumer barometer for December shows consumer sentiment to be at its lowest level since the beginning of the year; the ifo Business Climate Index dimmed down again in November. According to a survey conducted by the German Retail Federation (HDE), the retail sector has so far been dissatisfied with sales during the important Christmas season. Apart from the generally subdued consumer sentiment, this is probably also due to increasing numbers of foreign online sales platforms.

Overall, the German economy is finding itself in a mixed situation: on the one hand, foreign trade and investment is under pressure from weak demand from abroad, its declining ability to compete and some individual bottlenecks in the supply of certain intermediate products, on the other hand, there are signs of a gradual stabilisation of the domestic economy, which is partly driven by fiscal measures that have recently begun to make themselves felt.

Robust global trade, but regional differences

Global industrial output expanded by 1.0 per cent in September over August, following a slight and temporary decline. Export volumes to Japan, China and other Asian economies, in particular, were up, whereas those to the US and the eurozone remained close to stagnation. Compared to September 2024, global production was up 3.5 per cent at the end of Q3. For the months after that, the indicators are also showing a robust picture: the S&P Global PMI for the global economy inched down 0.3 points to 52.7 in November, staying on a solid growth trajectory. For the services sector, the indicator signals higher activity (53.3 points) than for industry (50.5 points). Sentiment among financial investors has continued to brighten in December in light of global economic development. At the end of the year, an increase of 8.1 to 10.4 points takes the indicator up to its highest level since June 2024. Investors are rating the economic outlook for eastern Europe, Latin America and Asia (excluding Japan) as particularly positive.

Until now, global trade has proven surprisingly resilient. After a slight fall of 0.4 per cent in August, it expanded by 1.1 per cent in September, putting it 5 per cent up in year-on-year terms. However, there are significant disparities hidden behind these figures. The global trade in goods was largely driven by the dynamic development of many emerging economies in Asia. By contrast, development in advanced economies such as the US, Europe and Japan was weaker. A similar picture emerges when looking at the data for October on the RWI/ISL Container Throughput Index: while the overall index went up marginally, from 136.8 to 137.2 points, container throughput in the German and European ports fell significantly for the third consecutive time. Throughput in the Chinese ports saw only a slight decline. Given that the higher US tariffs are unlikely to have reached their full impact, because of stockpiling, delays and implementation and exemptions for freight that had already left the ports at the time they were introduced, observers are expecting a weakening of the dynamism of global trade in the coming months.

Exports recently up, but with challenging sales prospects

At the beginning of Q4, nominal exports of goods and services saw another increase (+1.2 per cent, adjusted for season and calendar days). This means that, from January to October, there was a year-on-year increase by 1.1 per cent overall. Exports to China (-11.5 per cent) and the US (-7.5 per cent) were down considerably, but exports to the EU (+3.8 per cent) propped up the overall figure. Nominal imports of goods and services decreased by 0.4 per cent compared to the preceding month, following a strong expansion. Overall, imports have increased 4.6 per cent year-on-year since the beginning of the year, mainly as a result of the gradual recovery of consumer demand for goods. Imports from the EU were up (+3.2 per cent), as were imports from third countries, such as China, (+8.3 per cent) or the US (+2.6 per cent). The monthly external surplus increased in seasonally adjusted terms in October (from €7.7 billion to €10.1 billion) as exports expanded and imports shrank. However, over the entire period from January to October it was considerably smaller year-on-year (-€48.2 billion) and stood at €100.4 billion.

Import prices rose by 0.1 per cent (seasonally adjusted) between September and October. As energy imports became cheaper, there was a certain amount of price pressure, mainly on intermediate goods. As export prices rose a little faster month-on-month (+0.2 per cent), the terms of trade improved slightly by 0.1 per cent. In real terms, the increase in export volume can therefore be expected to be a little less and the decline in imports a little more pronounced in price-adjusted terms.

Despite the fairly resilient development of the global economy, the leading indicators have so far been sending hardly any positive signals for Germany’s foreign trade and investment. Volumes of new orders from abroad continue to be volatile. After the previous increase, they fell again between September and October (-4.0 per cent), with demand for capital and intermediate goods from outside the eurozone falling the most. Following a strong rise in new orders for non-automotive vehicle manufacturing and electric equipment, the most recent development shows an opposite pattern. Excluding large orders, which are subject to strong fluctuations, overall orders from abroad were up 0.5 per cent recently. In November, ifo export expectations dimmed down considerably, from +2.2 to -3.4 points. Following two optimistic months, the automotive sector is expecting exports to fall again. The important mechanical engineering sector is also expecting no more than stagnation in its foreign business.

At the beginning of Q4, the latest data is pointing to stabilisation, but not an outright recovery of the export business. Based on the latest forecasts, the negative impact of the tariff increases will make themselves felt more prominently at the turn of 2025/2026. This means that sales prospects for German exporters will continue to be challenging in the coming months.

Industrial activity remains dampened despite positive start to Q4

In October, the goods-producing sector was again able to expand its output. Adjusted for price, calendar days and season, output exceeded that of September by 1.8 per cent. The figure for September has been adjusted slightly downwards from +1.3 per cent to +1.1 per cent. In calendar-adjusted terms, output from the goods-producing sector was up 0.8 per cent in October 2025 year-on-year.

Industrial output grew by 1.5 per cent month-on-month. This expansion was again largely attributable to capital goods production (+2.1 per cent). Following the declines in the preceding months, the construction sector was able to strongly increase its output by 3.3 per cent. For the first time in the second semester, structural engineering also saw a slight rise in output (+0.9 per cent). Parallel to this, energy generation continued on its upwards trajectory (+1.4 per cent).

Within the industrial sector, some individual branches saw a largely positive development. Strongly noticeable gains in output were achieved in the areas of data processing equipment and optical products (+3.9 per cent), pharmaceuticals (+3.3 per cent) and mechanical engineering (+2.8 per cent). By contrast, output from automotives and automotive parts (-1.3 per cent) and chemical products (-0.3 per cent) were down after expanding in the months before.

The three-month comparison for the goods-producing sector continues to show a decline in output (-1.5 per cent). Industrial production between August and October was also weaker than it had been from May to July (-1.9 per cent). Only construction and energy generation inched up a little (+0.2 per cent each) in the three-month comparison.

New orders in the manufacturing sector were up appreciably in October. The order volume rose by 1.5 per cent from September, after adjustment for price, seasonal and calendar effects. The figure for the preceding month had already been revised upwards to 2.0 per cent (up from +1.1 per cent). The three-month comparison, which is less affected by fluctuations, however, shows that new orders were -0.5 per cent below the figure for the preceding quarter. The comparison with October 2024 also shows a decline (-0.7 per cent).

The increase in the preceding month had been due to strong domestic demand, which had been up 9.9 per cent. By contrast, orders from abroad, mainly from outside the eurozone, receded by 4.0 per cent. A breakdown of the figures for individual categories of goods shows that the rise is driven by capital goods, which increased by 4.9 per cent – mainly due to a large domestic order. Consumer and intermediate goods were less in demand (-2.2 per cent and -3.4 per cent respectively).

In the comparison of individual branches, it becomes clear that there has been a prominent increase (+87.1 per cent) in orders of non-automotive vehicles, which also include military goods. Metal production and metalworking also received a significantly higher volume of orders (+11.9 per cent). Orders in some other branches fell quite strongly, e.g. for electric equipment (‑16.2 per cent), IT and optics (-3.3 per cent) and mechanical engineering (-2.2 per cent). Demand for chemical products remained stable (+0.0 per cent).

Despite repeated increases in output and growing order volumes, the outlook for industrial activity remains subdued. The development of new orders is once again shaped by large placed in the context of defence procurement. Adjusted for the influence of these, a moderate plus of 0.5 per cent remains for October. While domestic new orders are now pointing upwards, orders from abroad – and especially from third countries – are weak as a result of the uncertainties in trade policy and the geopolitical situation. This subdued development of (foreign) demand is likely to continue to put a damper on industrial output.

Retail turnover down; sentiment indicators divided

Price-adjusted retail sales (seasonally adjusted, excluding motor vehicles) fell by 0.3 per cent in October compared with the preceding month. Food retailing was up by 1.2 per cent while sales of non-food items fell again for the third consecutive time, dropping -0.7 per cent. Compared with the same month a year earlier, retail turnover was up 0.8 per cent in October, with food sales up 1.7 per cent and non-food sales up +1.0 per cent. The three-month comparison shows a decline of -0.3 per cent in total retail turnover, with weaker figures for non-food sales than for food.

Turnover in the hospitality sector declined between August and September, falling by 0.4 per cent in nominal terms and by 1.3 per cent in real terms. Compared with the previous year, hospitality turnover was down 1.4 per cent nominally and -4.9 per cent in real terms. According to the Federal Statistical Office, falling consumer spending on catering and hospitality services in Q3 2025 slowed down overall private consumption.

Overall passenger car registrations were down 2.2 per cent in November compared with October, but showed a strong three-month increase of 6.9 per cent. Relative to November 2024, registrations were still up by 2.5 per cent. Passenger car registrations by private individuals rose 4.8 per cent month-on-month and 9.3 per cent in the three-month-comparison. Compared with November 2024, the number of new car registrations by private individuals was significantly higher (+10.3 per cent). New passenger car registrations by companies and the self-employed fell by 5.8 per cent between October and November, but increased in the three-month-comparison. After a decline of 0.3 per cent in consumer spending in Q3, 2025 – the first in almost two years – the leading indicators are currently showing a mixed picture. According to GfK forecasts, the consumer climate is expected to brighten a little in December, rising by 0.9 points to -23.2 after ceding 1.6 points in November to stand at -24.1. Another fall in income expectations had a dampening effect here and overall economic expectations also gave way. However, propensity to purchase increased for the second consecutive month, reducing propensity to save money. Nevertheless, the HDE consumer barometer dimmed down in December, falling to its lowest value since the beginning of the year. The ifo business climate index for retail (including motor vehicles) went down 4.1 points to -27.4 – its lowest reading since February 2024. Both assessments of the current situation and expectations saw a significant deterioration, even though the indicators had previously already been in the clearly negative zone.

Overall, the most recent sentiment indicators point to relatively subdued consumer activity in Q4 2025 and in the important run-up to Christmas. Consumers are being deterred by the price increases for food and services observed in recent months and by more fundamental concerns about future price developments and job security. Nevertheless, GfK expects stable sales in the run-up to Christmas, given the consolidation of consumer sentiment at last year’s level.

Stable price development in november

The inflation rate – the year-on-year increase in consumer prices – stood at 2.3 per cent in November. This is the same rate as in October, but marks a slowdown compared to the rates recorded in the summer. The trend towards services being the main drivers of inflation is ongoing. While the core inflation rate softened to a minimal degree, prices for services (+3.5 per cent) were the strongest drivers of inflation. Goods were 1.1 per cent more expensive, whereas the inflation of food prices slowed down to 1.2 per cent. Energy prices are continuing to go down, but much less so than during the summer.

Services account for the largest portion of the price increase, compensating the lasting negative contribution of energy. Goods are contributing a falling portion to overall inflation, with price increases continuing to remain low, but not falling as quickly as before. Foodstuffs only accounted for a marginal contribution to overall inflation. This means that the development of consumer prices is increasingly determined by services prices (e.g. for nursing or social services) and less by import or energy prices.           
It is likely that consumer prices will remain just above the 2 per cent mark, with services expected to be disproportionate drivers of inflation, for instance due to the higher wage levels for nursing staff, in particular, that have been agreed in collective bargaining. By contrast, upstream prices (producer prices) have receded year-on-year, particularly for agricultural produce, but also in the industrial sector.

Stagnation in the labour market continues into Q4

The trend on the labour market is typical for the end of the year. The number of unemployed persons remained almost unchanged in November, increasing by one thousand on a seasonally adjusted basis. Underemployment fell slightly, by eight thousand persons. The number of gainfully-active persons was also marginally down (-2,000) compared to the figures for the preceding month. Employment subject to social security contributions was up (+12,000) in September, bringing it close to the figures recorded in the preceding year. For the first time since the beginning of the year, there was a growing number of persons in short-term work (+37,000). This corresponds to the usual increase after the end of summer vacation time. The number of persons on short-time work remained at levels similar to those of the preceding months.

So far, the leading indicators do not suggest an imminent revival of demand for labour. While the number of vacancies reported to the Federal Employment Agency increased appreciably in November, this is due to a collective report made by a single company and does not suggest a turnaround on the job market. The ongoing reduction in the overall workforce can also be observed in the ifo employment barometer, which has fallen by a considerable margin. Employment prospects in the goods-producing sector and the services sector saw another marked deterioration. Job shedding in the retail and wholesale sector is also continuing, leaving the construction sector as the only one recording a slight increase in demand for workers. In light of the weak economic development so far, a revival on the labour market is therefore currently not in sight.

Business insolvencies remain at elevated levels

According to official statistics, corporate insolvencies increased by 2.0 per cent in September compared with the preceding month, reaching 1,940 filed cases. Overall, there were 18,125 cases of corporate insolvencies reported in the first three quarters of 2025; this is an increase of 11.7 per cent year-on-year. This is the highest level recorded since 2014 (18,199). The volume of expected claims fell by 12.0 per cent between the first three quarters of 2024 and 2025; the number of employees affected was down 11.9 per cent. The persistently dynamic insolvency trend is being driven by several factors, among them the ongoing weakness in the overall economy, structural challenges, rising costs and geopolitical uncertainty.

The IWH insolvency trend for corporations and partnerships – methodologically narrower and more up-to-date than the official statistics – recorded 1,293 insolvencies in November, down 17 per cent from the preceding month and 3 per cent year-on-year. The number of affected employees (9,000) fell by 30 per cent from September and was 25 per cent below the level recorded in November 2024. For December, the Halle Institute for Economic Research is expecting the number of insolvencies to continue to fall, before picking up again at the beginning of the new year.

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¹ This report is based on data that were available as of 12 December 2025. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted for calendar-day and seasonal variations.