Germany's economy will take a hit from the Iran war in Q2, ministry says
Germany's economy ministry said the Iran war's energy shock will weigh on growth during the second quarter. The ministry pointed to pressure on industrial output and slowing export orders. The government signalled a likely downward revision to its 2026 growth forecast.
Germany's economy ministry said in its monthly report that the surge in energy prices triggered by the Iran war will weigh on the German economy during the second quarter. The ministry highlighted that higher natural gas and electricity prices are squeezing margins, particularly in chemicals and metals.
Factory orders fell 1.4% year-on-year in April; the slowdown in export bookings became more visible in automotive and machinery. The ministry said domestic demand in services is providing some offset, but is not enough to compensate for losses in manufacturing.
The government's April growth forecast of 1.2% for 2026 may be revised lower at the next update. The Bundesbank president said earlier this week that the ECB may need to reassess its policy stance if the energy shock proves persistent.
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