For the first time this year, the German economy showed signs of slowing in July, according to data released by Destatis, Germany’s federal statistical office. Goods exports dropped by 0.8% compared to June, reaching 138.2 billion euros. This decline was mainly due to reduced exports to European Union countries, which fell by 1.6% compared to the previous month. Exports to China continued to decline, though at a slightly slower rate than in previous months, down by 9.5% in July. Despite this recent slowdown, Germany's economy had shown resilience in the first half of 2026, even as the U.S. and Israel conducted a war against Iran. Exports had been a key driver of growth, supported by increased public spending. As a result, several German economic institutes raised their growth forecasts for the year. The Ifo Institute, a prominent economic research group, now predicts a 1.4% growth rate for 2026, up from an initial estimate of 0.8%. German exporters are increasingly relying on the European market, which has remained strong. While exports to China dropped sharply by 12.7% compared to the same period last year, sales to other EU countries rose by 7.1% year-on-year. Trade with the United States also showed signs of improvement. Overall, exports for the first seven months of 2026 were up 4% compared to the same period in 2025, contributing to a significant trade surplus of 126 billion euros for the year so far, mostly with other EU nations. The Ifo Institute noted that, after years of economic stagnation, recovery forces are beginning to outweigh the challenges posed by the geopolitical situation. In its latest report published on September 3, Ifo stated that orders have gradually improved since the beginning of the year, and export prospects have recently increased significantly. The institute has raised its growth forecast for Germany to 1.4% for 2026, reflecting growing confidence in the economy. In August, Ifo’s export expectations index saw its strongest increase since June 2020, signaling a renewed strength in the export sector. According to Ifo economist Klaus Wohlrabe, exports to the EU are growing strongly, while those to China remain stable. He highlighted particular optimism among manufacturers of electrical equipment, computers, and electronic and optical products, indicating a positive outlook for certain key industries.