According to a survey by the Munich-based ifo Institute for Economic Research, managers at large German companies are showing optimism that has not been seen for a year. Many of the economic data point to an upward trend. GDP grew by 0.3 percent from April to June compared to the previous quarter.
There is also good news in relation to industrial orders - they have reached their highest level since the beginning of the year, reports ARD.
What is the reason for the rise?
The explanation is also in the growth of exports, the German public media indicates and predicts that there is a good chance that the trend will prove permanent. The reasons are the progress of digitalization and the application of artificial intelligence (AI), since in many areas German technology is sought after for the construction of AI computing centers, says Klaus Wohlrabe from ifo. In August, the expectations of German industrial companies improved.
Meanwhile, the state is pouring billions into infrastructure and defense. The number of large orders - for example, for data processing technology, electronic and optical devices - is rising. The situation is similar for various types of vehicles - airplanes, ships, trains and military vehicles. “After years of weakness, construction could become a growth engine for the German economy in 2027,” Sebastian Dullien, scientific director of the Institute for Macroeconomics and Economic Research, told ARD.
Should the economic forecasts be adjusted?
In the end, the first half of the year was much better than expected - despite the problems arising from the war in Iran, the data show. And the reaction of banks and unions was not long in coming: the BVR banking union doubled its forecast for GDP growth this year from 0.5 to one percent, the Institute for Macroeconomics expects "at least 1.1 percent", and the KfW promotional bank increased its forecast from 0.7 to 1.1 percent.
Is there reason for more confidence?
Between January and June, 3,053 new start-ups were founded, which is an increase of 52 percent compared to the previous year. Verena Paußder, president of the Start-up Union, says that there have never been so many start-ups in Germany. "AI significantly reduces the obstacles to starting new companies and more and more people are taking advantage of this opportunity."
According to economists, this is a positive sign. "The German economy is currently undergoing a structural change and should be able to reduce its heavy dependence on the automotive industry," says banking analyst Thomas Gitzel. According to him, the German economy is currently diversifying.
Will the recovery be sustainable?
Many economists are hesitant to jump to conclusions, as a number of risks remain - for example, due to the chaotic economic policy of US President Donald Trump and high energy prices due to the war in Iran. These are putting pressure on Germans' purchasing power and limiting their propensity to spend.
"There is no sign of any revival in private investment," says Commerzbank economist Ralf Solvin. "There can be no talk of a sustainable economic recovery." He also points out the structural problems in the German economy - for example, in the automotive industry, which is suffering not only from Trump's tariffs, but also from growing competition from Chinese electric car manufacturers.
How are wages developing?
This year, tariff payments in Germany will most likely increase more than consumer prices, writes ARD. It is assumed that the increase in wages will reach an average of 3.1 percent, and inflation in the first half of the year is 2.4 percent. In this situation, employees will have a real increase of 0.7 percent, which will mean more purchasing power - i.e. an increase in consumption is possible, which will contribute to economic growth.