VDMA sees signs of a bottoming out German mechanical engineering: First signs of easing, cautious optimism emerging

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Germany’s mechanical engineering industry closed 2025 with order books at the previous year’s level, according to an analysis by the VDMA. Business sentiment has also shown a slight improvement.

Germany’s mechanical and plant engineering sector closed 2025 with order books at the previous year’s level. According to an analysis by the VDMA, this results in overall real zero growth in orders. The outcome was primarily supported by a seven percent increase in orders from euro area partner countries, while domestic orders (minus one percent) and orders from non-euro countries (minus two percent) declined over the year as a whole.

In December 2025, however, incoming orders weakened again. In real terms, they were five percent below the previous year’s level. The sharpest decline came from non-euro countries, down eleven percent, which the VDMA partly attributes to unusually large orders booked in December of the previous year that were absent this time. Orders from euro area countries fell by three percent, bringing total foreign orders down by nine percent. By contrast, the domestic market developed positively in December, recording a year-on-year increase of seven percent.

“The indications of a cyclical bottoming out for mechanical and plant engineering in Germany are becoming more pronounced,” commented VDMA Chief Economist Dr Johannes Gernandt. This is reflected both in the stagnation of orders on an annual basis and in the growth in incoming orders during the fourth quarter. For 2026, the association therefore continues to forecast real production growth of one percent. At the same time, Gernandt pointed to the role of policymakers: structural reforms to improve the competitiveness of Germany as an industrial location are needed to enable sustainable, stronger growth.

Overall, the fourth quarter of 2025 delivered a real increase in orders of three percent. Domestic orders remained at the previous year’s level, while foreign orders rose by four percent. This figure masks divergent developments: a two percent decline from euro area countries contrasted with a six percent increase from non-euro markets.

Business sentiment improving

Sentiment in the sector has also brightened slightly. According to the VDMA’s economic survey conducted in January, just under 30 percent of the 962 companies surveyed rate their current situation as “very good” or “good,” up from 23 percent in October. The share of companies assessing their situation as “poor” or “very poor” fell from 33 to 24 percent over the same period. Expectations for the next six months have also improved: 30 percent of companies are now optimistic, while only nine percent expect a deterioration.

Looking ahead, around 57 percent of companies expect nominal revenue growth in the current year, just under 29 percent anticipate stagnation, and fewer than 15 percent foresee a decline in revenues. “There are now more companies viewing their current business situation positively than negatively,” Gernandt said. This is an encouraging sign, but not a cause for complacency. Uncertainty remains high, particularly in light of fragile developments in key customer industries and sales regions.

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