Production in the machinery and equipment manufacturing sector in Germany is expected to shrink in 2026 for the fourth consecutive year. Due to the weak development in the current year, economists at VDMA have revised their production forecast for 2026 from stagnation to a real decline of 2 percent. However, a turnaround is emerging for 2027: a real production increase of 3 percent is expected. '2026 will thus likely be the fourth consecutive year of production decline. The better order situation and slightly improved expectations suggest that production will grow again in 2027,' says VDMA chief economist Dr. Johannes Gernandt.
The downward revision for 2026 follows from the persistently weak production: in the first seven months, it was 4.1 percent lower in real terms compared to the previous year. Technical capacities remained significantly underutilized. At the same time, some leading indicators are sending positive signals. Price-adjusted order intake increased by 5 percent in the first seven months of the current year compared to the previous year. Orders from non-Euro countries increased particularly strongly by 14 percent. Business expectations have also improved slightly recently. This should also be reflected in production in the second half of the year, but it will not be enough to offset the weak first half of the year. These impulses have not yet reached the broader machinery and equipment manufacturing sector. Demand from the German domestic market remains significantly behind that of foreign markets.
VDMA chief economist Dr. Johannes Gernandt
For 2027, VDMA economists expect that a – despite numerous challenges – robust global economy, rising equipment investments, and fiscal impulses in Germany will support production. In addition to government investments, private investment activity is also expected to pick up moderately. However, the recovery remains fraught with significant risks: high geopolitical uncertainty, elevated interest rates, and the persistently weak competitiveness of Germany as a location could jeopardize the turnaround. 'The expected production increase of 3 percent is likely to end a four-year decline. However, a sustainable upswing will only result if better investment conditions mobilize private capital and strengthen the competitiveness of Germany as a location,' emphasizes Dr. Gernandt.
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