German industry is expected to stagnate in 2026, according to the Federation of German Industries (BDI), after manufacturing activity has been declining continuously since 2022. The outlook has been downgraded due to high energy costs, supply chain risks, and domestic structural challenges weighing on Europe’s largest economy.

BDI said industrial output remains at a low level, with capacity utilization just above 78%, and the sector could record a fifth consecutive year of contraction if conditions do not improve.

In addition, geopolitical tensions are increasing energy costs and logistics risks, further worsening the outlook for the industry.