German Factory Orders Surge 5.6% Amid Defence Spending Boost

Factory orders in Germany experienced an unexpected increase of 5.6 percent in November, driven primarily by heightened demand for defence equipment. This rise marks the third consecutive monthly gain, according to preliminary data released by the statistics agency Destatis on Thursday. Analysts had anticipated a decline of 1.3 percent, making this boost a notable shift for the country’s economic landscape.

The surge in orders comes as Europe accelerates efforts to rearm in response to geopolitical tensions, particularly following Russia’s invasion of Ukraine. Chancellor Friedrich Merz has pledged substantial investments in defence, committing to expenditures amounting to hundreds of billions of euros. The German economy ministry highlighted that the uptick in defence orders has played a significant role in this recent growth, stating, “The trend of increasing demand from Germany and the eurozone is continuing.”

Positive Signs Amid Economic Challenges

This increase in factory orders offers a glimmer of hope for Germany, which has been grappling with a prolonged economic decline characterized by a manufacturing slump, elevated energy costs, and diminishing demand in key export markets. Analyst Jens-Oliver Niklasch from LBBW Bank remarked that the overall rise in orders could indicate a potential turnaround in the economy. He cautioned, however, that increased defence spending alone may not sustain long-term growth. Nonetheless, he acknowledged the significance of seeing “a sign of life from industry.”

The November figures were bolstered by substantial orders in the transport equipment category, which includes military vehicles, aircraft, ships, and trains. Alongside defence-related demand, there were notable increases in orders for electrical and IT equipment, as well as machine tools. Domestic orders surged by 6.5 percent, while foreign orders rose by nearly 5 percent, with demand from the euro area increasing by over 8 percent.

Ongoing Challenges and Economic Outlook

Despite these promising developments, the economy ministry cautioned that orders from certain international markets have remained weak since early 2025, primarily due to ongoing trade and geopolitical uncertainties. The impact of the US tariff measures has particularly affected German firms, as the United States stands as Germany’s largest export market.

Looking ahead, the German government forecasts modest growth of 0.2 percent for 2025, with expectations of a more robust economic recovery in the following years. As the nation navigates these complexities, the recent surge in factory orders may serve as a vital indicator of resilience and potential recovery in Germany’s industrial sector.