Defense booms, mechanical engineering continues to fall: Germany's monthly winners and losers

Germany's industrial sector is showing a stark divergence in performance, with mechanical engineering experiencing a continued slump while the defense and aerospace industries surge. In June, the mechanical engineering sector's production index fell to 84.2 points, its lowest in twelve months, representing a nearly 16% decrease compared to the 2021 average. This sector, which employs around a million people and contributed over 12% of the industry's total turnover in 2025, is a significant drag on the overall economy.

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The loser of the month is, as in May, mechanical engineering.

Despite the downturn, a slight glimmer of hope emerged with a nearly 13% increase in new orders for mechanical engineering in June. However, this rise was largely driven by large-scale orders, making it uncertain whether it signals a sustainable recovery. The NZZ Industrial Monitor, based on data from the Federal Statistical Office, tracks real production in the manufacturing sector, adjusting for price, calendar, and seasonal effects.

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There is a small glimmer of hope, however: incoming orders in mechanical engineering rose by almost 13 percent in June.

In stark contrast, the aerospace and automotive manufacturing sector reached a twelve-month high in June, with its production index hitting 139.9 points. This represents a nearly 40% increase in production compared to 2021, the year before Russia's invasion of Ukraine. Data from industry associations reveal that the military aviation segment grew more than twice as fast as the civil segment in 2025, with a 35% increase.

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The military aviation sector grew more than twice as fast as the civil sector in 2025, with 35 percent more.

The boom in defense is also benefiting shipyards, with marine shipbuilding identified as a "significant growth driver." Major projects underscore this trend, including Canada's selection of Kiel-based shipbuilder TKMS as the preferred supplier for up to twelve submarines, and the company's construction of four new frigates for the German navy. This robust performance in the defense sector is cushioning the overall decline in German industry.

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The defense boom has also reached the shipyards. The association names marine shipbuilding as a 'significant growth driver.'