--- title: "German Industry Slumped in March on Outbreak of Iran War — 2nd Update" type: "News" locale: "en" url: "https://longbridge.com/en/news/285684288.md" description: "German industrial production fell 0.7% in March due to rising energy prices from the Iran conflict, marking a setback for the country's manufacturing recovery. The decline follows a 0.5% drop in February, with a year-on-year decrease of 2.8%. The BDI industrial association warns of stagnation for German industry this year, while car sales slowed significantly in April. Despite a rise in factory orders, the outlook remains bleak as energy prices soar and supply-chain disruptions loom. The European Central Bank may raise interest rates, further impacting industrial firms." datetime: "2026-05-08T07:50:13.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/285684288.md) - [en](https://longbridge.com/en/news/285684288.md) - [zh-HK](https://longbridge.com/zh-HK/news/285684288.md) --- # German Industry Slumped in March on Outbreak of Iran War — 2nd Update By Ed Frankl German industrial production retreated in March, as the start of the conflict in the Middle East sent energy prices climbing, a setback for any recovery for manufacturing in Europe's largest economy this year. Germany's industrial sector had been expected to rebound in 2026, after a downturn that stretches back into the last decade. Pandemic-era supply issues were exacerbated by the pivot away from cheap Russian gas, increased competition from China for German goods, and an expensive green-energy transition. But the country's government last year pledged to unlock more than $1 trillion for defense and infrastructure--investments that it hoped would revitalize Germany's traditionally dominant manufacturing sector. Rising oil-and-gas prices stemming from the war in Iran have darkened the outlook, and are especially damaging to a key energy importer like Germany. Output fell 0.7% in March, driven by a slump in energy production, and accelerating a 0.5% decline in February, Germany's statistics agency Destatis said Friday. A consensus of economists polled by The Wall Street Journal expected a 0.5% rise in March. On year, production was down 2.8%, the data showed. As a result of the war, German industry faces stagnation at best this year, the country's BDI industrial association said last month, with the conflict creating additional uncertainty and strain for companies. Sales of cars within Germany slowed significantly in April, the KBA motor authority said Thursday. Meanwhile, Volkswagen's head of procurement Karsten Schnake said in an interview with German trade publication Automobilwoche, also on Thursday that the automaker might have to raise prices should the war drag on beyond the middle of the year. President Trump's threatened tariffs of 25% for European car imports into the U.S. present another headache for carmakers. "Given that energy prices continued to soar in April and risks of supply-chain disruptions increased, any near-term improvement in industrial production looks very unlikely," Carsten Brzeski, global head of macro at ING bank, said in a note. With production down 1.2% on quarter and Germany's trade surplus narrowing significantly in March, gross domestic product could be downgraded from the 0.3% recorded in January-March, he added. Imports jumped 5.1% in March to their highest value since November 2022, when Germany was paying increasing prices for energy imports after switching off the Russian gas spigot. However, in more positive news, factory orders--which feed into production data with a lag--climbed unexpectedly in March, Destatis said in separate data Thursday. However, some of that might have been front-running of stocks to get ahead of supply-chain disruption prompted by the closure of the Strait of Hormuz. The waterway is a key choke point for inputs like industrial gases and fertilizer. The European Central Bank is expected to raise interest rates between two and three times this year, perhaps as soon as next month, according to LSEG data, likely making borrowing more expensive for industrial firms. Write to Ed Frankl at edward.frankl@wsj.com (END) Dow Jones Newswires May 08, 2026 03:35 ET (07:35 GMT) Copyright (c) 2026 Dow Jones & Company, Inc. ### Related Stocks - [EWG.US](https://longbridge.com/en/quote/EWG.US.md) - [DAX.US](https://longbridge.com/en/quote/DAX.US.md) - [VOW.DE](https://longbridge.com/en/quote/VOW.DE.md) - [VOW3.DE](https://longbridge.com/en/quote/VOW3.DE.md) - [VWAGY.US](https://longbridge.com/en/quote/VWAGY.US.md) - [VWAPY.US](https://longbridge.com/en/quote/VWAPY.US.md) - [ING.US](https://longbridge.com/en/quote/ING.US.md) ## Related News & Research - [German finmin says Europe united, prepared to act amid US trade tensions](https://longbridge.com/en/news/285079786.md) - [Germany March industrial orders +5.0% vs +1.0% m/m expected](https://longbridge.com/en/news/285491904.md) - [German wholesale prices hit 3-year high on Iran war impact](https://longbridge.com/en/news/286244053.md) - [ECBs Lane:Monetary policy decisions will continue to be made on a meeting-by-meeting basis](https://longbridge.com/en/news/286307369.md) - [Euro zone yields steady near multi-year highs as investors catch their breath](https://longbridge.com/en/news/286899970.md)