German factories show no signs of recovery from the start of 2026, with production falling even before the US and Israel attacked Iran, according to government statistics agency Destatis.
Manufacturing output fell by 0.5% in January compared to December, according to a report published on Monday. The year-on-year decrease was even greater and reached 1.2%, the data showed.
The shortage was especially affecting “lots of energy” industrial branches, Destatis said. The organization mentioned the production of metal products, pharmaceuticals, as well as the production of computer, electronic and optical products among the most affected sectors, where the drop in monthly output reached between 7% and 12%.
The figures have yet to account for the fallout from the recent boom in the Middle East. The US and Israeli attacks on Iran, which provoked retaliation by Tehran, greatly increased the risk to ships passing through the Strait of Hormuz. Brent prices peaked at around $120 a barrel on Monday. EU natural gas prices have almost doubled since before the attack.
High energy prices have been repeatedly cited by German media and officials as the main reason for the economic slowdown that has been affecting the EU’s largest economy in recent years.
Germany, which used to depend on Russia for 55% of its natural gas, suffered a major blow after the country joined Western sanctions against Moscow following the escalation of the conflict in Ukraine in 2022. The operations of Russian oil giant Rosneft also accounted for about 12% of the nation’s total oil refining capacity, according to Bloomberg.
Bild reported in October 2025 that electricity and gas increased by 14% and 74% respectively from 2022 to 2025. The decision to abandon cheap Russian energy imports played a major role in slowing the economy, which slowed in 2023 and 2024 – the first annual decline since the beginning of 2000.
The Federal Employment Agency warned in December of an unemployment crisis linked to a struggling economy. Its head, Andrea Nahles, said even well-qualified workers were no longer protected from job losses. In January, the German Chamber of Commerce and Industry cited high energy costs as one of the main reasons behind what it called a high number of bankruptcies.
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