Survey: Pessimism deepens in German machinery sector

Sentiment among Germany's mechanical engineering companies has worsened further, with more than half of industry executives now pessimistic about the domestic economy, according to a quarterly survey by consultancy PwC published on Tuesday.

Some 59% of managers in the machinery and plant engineering sector said they had a negative view of Germany's economic outlook, up from 47% in the third quarter, the PwC Mechanical Engineering Barometer showed. Only 14% expect economic growth, down from 20% previously.

PwC surveyed 150 executives across the sector, which has seen output decline for three consecutive years. Industry association VDMA expects a modest recovery next year, forecasting production growth of about 1%.

Looking ahead to next year, around one-third of respondents forecast revenue growth, an improvement from the previous quarter, but the majority still expect sales to shrink. On average, managers anticipate revenues to fall by 2.8% compared with 2025.

"We are heading into the new year with a negative revenue forecast for the fourth time in a row," said Bernd Jung, head of PwC Germany's industrial manufacturing practice group.

Rising cost pressures remain the biggest constraint on companies, cited by 83% of executives. Other key factors weighing on the sector include geopolitical uncertainty abroad, named by 78%, and weak demand, cited by 71%, the survey showed.

Around two-thirds of executives said they expected labour costs to rise, with slightly fewer citing higher prices for raw materials and intermediate goods. On average, they expect labour costs to increase by 4.7% in 2026, while raw material prices are seen rising by 5.2%.

Only one-third of respondents expect energy prices to rise, with the study citing positive effects from Germany's industrial electricity price cap and the special infrastructure and climate neutrality fund.

"High costs are the German industry's major weakness," Jung said, adding that it is becoming increasingly difficult to produce profitably and maintain a strong competitive position in global markets.

Respondents were more upbeat about the global economy, with 27% expecting growth. The study attributed this in part to a tariff agreement between the European Union and the United States, as well as easing trade tensions between the US and China, the main export markets for German machinery makers.

Even so, most respondents remained undecided or sceptical about the global outlook.