German factory orders rose less than expected in February, increasing 0.9% month-over-month after a steep 11.1% decline at the start of the year. The figure fell short of the 3% median estimate in a Bloomberg survey. Stripping out large orders, the gauge climbed 3.5%, according to the statistics office.

Germany's economic outlook has darkened considerably due to the Middle East conflict that began February 28. The country faces particular vulnerability to surging energy costs from the Iran war. Leading research institutes last week slashed their 2026 growth forecast to 0.6% from 1.3%. While infrastructure and defense spending totaling hundreds of billions of euros should provide some domestic boost, the trajectory remains uncertain.

Investor confidence in Germany plummeted in April, with Sentix reporting expectations dropped to their lowest level since September 2024. This presents a significant challenge for Chancellor Friedrich Merz, who had counted on higher fiscal spending to revive an economy that expanded just 0.2% in 2025 after years of stagnation. Pressure is mounting on the government to unveil additional measures to support companies and consumers after lawmakers approved an initial package last month.