Germany's manufacturing sector rebounds from the bottom?

Goldman Sachs has discovered that the underlying power of Germany's manufacturing sector, the economic engine of Europe, is quietly restarting through tracking truck mileage and defense orders. According to news from the Wind Trading Desk, Goldman Sachs' economic research team pointed out in a report released on February 6 that although Germany's industrial production (IP) has been declining since peaking in 2017/18, signs of a bottoming out were observed last year. Despite unexpectedly weak data in December, this is more statistical noise than a trend reversal. Goldman Sachs believes that Germany's manufacturing sector is on the eve of a cyclical recovery by constructing more refined statistical models, expecting "solid growth" driven by domestic demand and fiscal expansion in the first half of 2026. "True Signals" in Truck Mileage? The biggest pain point in Germany's macro data is "extreme instability." Industrial production, orders, sales, and various survey data often send conflicting signals. For example, the decline in industrial production in December ended three consecutive months of strong growth, raising market concerns again. At the same time, this diverged from the rebound in manufacturing orders. To clarify the truth, Goldman Sachs constructed a "Nowcasting" framework. The analysis found that compared to PMI data, truck toll mileage and manufacturing sales are more accurate predictors of recent industrial production. Based on the hard data and survey data available so far, Goldman Sachs' model provides a clear short-term forecast: "Our model currently predicts that following the weakness in December, industrial production in January will rebound (expected month-on-month growth of 1.5%)." This is not only a mean reversion but also a logical deduction based on order growth and the recovery of business sentiment. This means that the market should not be deterred by weak data from a single month, as short-term fluctuations obscure the actual warming of activity. First Half of 2026: Backlog Orders Release Growth Potential To avoid the dramatic fluctuations of monthly data (usually a month of high growth followed by a month of low growth), Goldman Sachs further developed a "Dynamic Factor Model (DFM)" to extract common signals from 82 sub-variables. This integrates 82 variables, including orders, sales from 24 industries, and the IFO climate index. The "Spot Factor" of this model has been sending clear recovery signals since the end of summer 2025. Although this improvement is not a straight-line increase, the direction is clear. However, investors need to remain patient. Although order growth is strong, it is mainly concentrated in severely backlogged sub-industries. This means that the transmission chain from "order" to "output" is longer than ever. Goldman Sachs emphasizes: "The conversion of order growth into production growth may take longer than usual, indicating that the enhancement of production activities will be gradual." Nevertheless, the model still points to a positive mid-term outlook: the underlying industrial momentum indicators have risen to recent highs, indicating that Germany's economy will experience a recovery driven by domestic demand in the first half of 2026. "Fiscal Dividend" Hedging "External Headwinds" However, it is important to be cautious that the recovery of Germany's manufacturing sector is not uniform but shows significant structural differentiation. On one hand, the automotive and parts and energy-intensive industries (accounting for more than 30% of production) still face challenges. These sectors are constrained by intensified global competition and uncertainty in external demand, resulting in persistently weak performance. Data from Goldman Sachs indicates that industries exposed to higher external competitive risks have seen a notably delayed recovery in output. On the other hand, fiscal policy is becoming a new growth engine. Domestic demand-oriented industries benefiting from expansionary fiscal policies are showing greater resilience. Among them, the defense industry has emerged as the brightest "new star." "The defense industry, in particular, shows a rebound in domestic demand driven by fiscal measures, and we expect this to be a sustained tailwind until 2026." With maintenance and procurement spending plans expected to quadruple between 2024 and 2029, defense-related orders, sales, and production have already seen significant growth. This growth is not limited to weapons and ammunition but has also spilled over into a wide range of sub-industries such as specialized clothing, optical equipment, and electronics. For the market, the logic is clear: Germany's growth story is shifting from "export-oriented" to "domestic demand and security-driven." Although the external environment remains complex, the certainty of domestic fiscal spending is providing support for the manufacturing sector. The above content is from [Chasing Wind Trading Platform](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For more detailed interpretations, including real-time analysis and frontline research, please join the【 [Chasing Wind Trading Platform ▪ Annual Membership](https://wallstreetcn.com/shop/item/1000309)】 [![](https://wpimg-wscn.awtmt.com/3c4a713c-7a38-4582-9850-d0eabaf0e7ad.png)](https://wallstreetcn.com/shop/item/1000309)