Decline in Industrial Orders: Middle East War Slows German Manufacturers

According to an Ifo Institute survey, the share of companies reporting bottlenecks in the supply of intermediate goods in May rose to 15.9 percent. In April, that share had still stood at 13.8 percent. Wohlrabe and his colleagues see this as a direct consequence of the Iran war, which broke out on February 28.

Middle East War as a Price Driver

Jörg Krämer said in response to the Reuters report: „Auch der Krieg im Nahen Osten fordere seinen Tribut." He pointed out that in the first month of the Middle East war, many companies had pulled forward orders out of fear of war-related supply disruptions. This pull-forward effect had artificially boosted the March gain and now made the April figures look all the weaker.

March had still produced a revised increase of 4.5 percent, after a previously reported gain of 5.0 percent. The drop in sentiment indicators such as the Ifo Business Climate, however, suggests no swift recovery, Krämer added. „Vielmehr dürfte die deutsche Wirtschaft im zweiten Quartal etwas schrumpfen", he forecast.

Particularly Affected Sectors

Manufacturers of electrical equipment were hit especially hard, with an order decline of 16.3 percent. Mechanical engineering also suffered from weakening demand (-7.4 percent). In the automotive industry, there were likewise significant declines according to the Federal Statistical Office: orders fell by 5.3 percent.

Regionally, orders from the euro zone plunged by 11.1 percent, while orders from the rest of the world edged up by 0.8 percent. Weaker demand from eurozone countries and in key sectors such as automotive and mechanical engineering thus accounted for the bulk of the decline.

Supply Chains Under Pressure

When large-scale orders are excluded, orders in April likewise shrank by 3.8 percent. Order books are thus weakening broadly and are not attributable to a few major projects alone, as the Federal Statistical Office explained on Monday. This report was broadcast on 08.06.2026 on Deutschlandfunk.

The background to this development is the Iran war, which broke out on February 28 and is causing great uncertainty, driving up energy prices, and triggering supply bottlenecks. German industry is responding with subdued investment and more cautious ordering.