German industry worsens as Middle East war takes its toll in World Economy News 09/05/2026 German industrial production weakened further in March as the war in the Middle East started to take its toll. The just-released industrial data for March illustrate the struggle of German industry to gain momentum in the first quarter of the year. Not only was the February drop revised downwards, with a 0.7% month-on-month decline in March, but industrial production in the full first quarter was more than 1% weaker than in the final quarter of 2025. The March drop was mainly driven by falling production in manufacturing. On a more positive note, activity in the construction sector rebounded somewhat in March. At the same time, export growth slowed to 0.5% MoM, from 4.7% in February. As imports surged once again, this time by more than 5% MoM, the trade surplus narrowed significantly, to the lowest level since November last year. Downward revision of first quarter growth has become more likely The German economy surprisingly showed a positive performance in the first quarter, growing by 0.3% quarter-on-quarter. Against this background, this morning’s industrial data is even more of a look in the rearview mirror than normal. Still, the fourth consecutive month without growth in industrial production provides at least two important insights into the German economy: As industrial production is down on the quarter and the trade surplus narrowed significantly in March, a downward revision to the first estimate of first-quarter GDP growth has become likely. It needs at least 1% growth in the second quarter to bring industrial production back into positive territory. A development that currently looks unlikely. Outlook has clearly worsened once again Looking ahead, not only has the outlook for German industry – and for the entire economy – worsened again, but the war in the Middle East and soaring energy prices have again exposed the fact that Germany is one of Europe’s largest net i