Many corporations express distress about insufficient business contracts, finding themselves in short supply.
The German economy, though showing some signs of progress, remains in a precarious position, according to Ifo expert Klaus Wohlrabe. The persistent lack of orders in key sectors such as automotive, mechanical engineering, and electrical equipment is a central brake on a substantial economic recovery, he comments.
The automotive sector has been particularly hard hit, with the proportion of companies reporting missing orders rising from around 35% to just under 43%. In June 2025, industrial orders in the automotive sector dropped 1.0% month-over-month, following a 7.6% fall in automotive orders in the previous month. Despite a short-term recovery in May, the June drop signals continuing vulnerabilities in export-driven demand.
The mechanical engineering sector, which includes machinery and equipment, has also seen a notable decline. Factory orders for machinery and equipment fell 4.2% in April 2025, while industrial production in this sector declined 2.4% in the months prior. The German machine tool industry saw a 10% drop in orders in Q1 2025 compared to the previous year, with domestic orders falling 30%.
The electrical equipment sector has faced a significant downturn, with orders down by 9.2% in April 2025. Production data suggests continuing weakness without significant recovery reported.
Overall, Germany’s factory orders have fluctuated, with a 0.6% rise in April 2025, followed by a 1.4% drop in May. Industrial production saw a steep decline of 1.4% in April but rebounded by 1.2% in May before further contraction in June.
The export-driven nature of these sectors contributes to the volatility amid global trade uncertainties and Eurozone economic dynamics. The contraction in German industrial orders contrasts with modest Eurozone GDP growth, where countries like Spain and France are more resilient.
In the metal industry, almost half of the companies now report an inadequate order situation, with manufacturers of electrical equipment reporting a 41% proportion of companies with missing orders. More than one-third of German companies lack firm orders, according to the Munich Ifo Institute.
Despite brief recoveries and some strong demand in select sub-sectors, the dominant trend from Q1 through mid-2025 shows declining orders and production in the automotive, mechanical engineering, and electrical equipment sectors, reflecting export and domestic demand pressures as well as broader economic headwinds in Germany’s manufacturing industries.
The cause of the lack of orders in the German economy remains unclear, and no timeline for the economic recovery has been provided. However, the value of companies lacking orders remains significantly above the long-term average, indicating the ongoing struggle for the German economy.
Community aid could serve to support businesses in the automotive, mechanical engineering, and electrical equipment sectors, as a majority of German companies in these industries are currently experiencing a lack of firm orders. An increase in funding for research and development in these sectors might also stimulate innovation and provide a pathway for economic recovery in the long term.
