German factory orders rebound as Iran-war effects fade

[BERLIN] German factory orders rebounded, encouraging news as the effect of the conflict in the Middle East on Europe’s biggest economy begins to fade.

Demand rose 1.9 per cent in May from a month earlier, following a revised decrease of 3.2 per cent in April. The result exceeds the 1.1 per cent gain seen by economists in a Bloomberg survey.

The rise was due to transport equipment including for the military, likely reflecting Germany’s upgrade of its armed forces. Without large-scale orders the increase would have been 1 per cent, Destatis said. A less volatile three-month reading showed a decline of 0.2 per cent.

“New orders in the manufacturing sector appear to be resuming the upward trend that began in the second half of 2025,” the Economy Ministry said in an emailed statement. “However, the trend remains highly volatile due to large orders. Furthermore, geopolitical uncertainty will remain high until the peace negotiations between the US and Iran are finally concluded.”

The report comes as Germany’s key manufacturers are struggling with US tariffs, weak demand in China and increased competition in Europe. Its economy had a good start to the year with 0.3 per cent growth between January and March, but the Iran war and higher energy prices have weighed on consumers and businesses.

Even so, business surveys suggest the factory sector expanded slightly in May and June, partly due to orders being timed to avoid rising energy prices. The Bundesbank predicts economic output probably stagnated in the second quarter.

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To shore up the economy, chancellor Friedrich Merz’s coalition announced a set of reforms on Thursday that includes attracting private capital. The government said it will also become more active in strategic industries and shield domestic capabilities.

“The federal government’s reform package has brought progress on individual points, but no broad-based breakthrough,” said Joerg Kraemer, chief economist at Commerzbank. “We don’t expect a strong recovery in the coming months. On one hand, the Iran conflict still represents a source of uncertainty. On the other, companies continue to suffer from an erosion of the country’s attractiveness as a business location.” BLOOMBERG