By Ed Frankl


German manufacturing orders rose sharply in March, a sign that businesses might have been building stocks in response to fears of disruptions to supplies and higher prices after the outbreak of the war in Iran.

Factory orders steadily climbed toward the end of 2025, helped by a more than $1 trillion fiscal stimulus from Germany's government intended to shore up the country's defense and fix creaking infrastructure after years of underfunding.

Some of that resilience was evident in March, as orders climbed 5.0%, German statistics office Destatis said Thursday. That was a second straight climb after February's 1.4% and far better than the 1.0% growth expected by a consensus of economists polled by The Wall Street Journal.

Even excluding large-scale orders worth over 50 million euros ($58.7 million)--much of which included major orders at planemaker Airbus--orders grew 5.1%, the highest level on that metric since February 2023, according to Destatis.

However, total orders were 4.1% lower in the first quarter than in the final quarter of 2025, a decline largely attributable to a high volume of large-scale orders toward the end of last year, Destatis said. Excluding those high-value orders, new orders increased 1.6% on quarter.

Improvement in March's orders was broad-based, led by electrical equipment, machinery and computer and optical products. Foreign orders outstripped domestic ones, though both posted growth.

"Without the war in Iran, this would have painted a positive picture for the German economy," Commerzbank senior economist Ralph Solveen said in a note to clients. "These are undoubtedly good figures."

But the conflict in the Middle East threatens to dim the recovery of Germany's industry, which had been lagging for years due to already high energy costs after Russia's invasion of Ukraine and increased competition with China.

Surging energy prices cause German companies to pay more for inputs and raw materials, as the closure of the Strait of Hormuz blocks a key waterway for petrochemicals and industrial gases.

"The massive rise in energy prices and the significantly increased uncertainty are likely to have recently dampened demand for German industrial goods, so that weaker figures are to be feared again in the coming months," Solveen said.

Purchasing managers' survey data this week showed output growing at a slower pace in April, as input costs increased at their fastest rate in over three-and-a-half years. Business expectations turned negative for the first time in 18 months, the report said, underlining that March's strength in orders likely won't endure.

Last month, the closely watched Ifo Institute business-climate index sank to its weakest level since May 2020 as the war's impact dug in. The IW Institute for the German economy on Thursday said it expects the German economy to expand 0.4% this year.

German industrial production data for March is due Friday and is expected to show a small pickup after a decline in February.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

05-07-26 0340ET