Germany’s chemical and pharmaceutical industry posted a stronger-than-expected second quarter but the apparent recovery is being driven largely by temporary effects rather than a lasting turnaround, as per the German Chemical Industry Association (VCI).
Seasonally adjusted production rose 2.4 percent from the previous quarter and was 0.9 percent above the level a year earlier. Industry sales jumped 7.3 percent to €54.5 billion, marking the first increase in more than three years.
But the gains are already losing momentum.
A modest improvement in industrial demand helped lift business in the second quarter, while many companies also built up inventories amid the Middle East conflict. At the same time, severe supply-chain disruptions temporarily hit competitors in Asia and the Middle East, benefiting some German and European manufacturers.
That boost appears to be fading. Orders and sales declined again in June 2026, raising doubts about the durability of the recovery.
Capacity utilization remains another major concern. At 73.2 percent, it was well below the long-term average of 83 percent and remained at an economically unsatisfactory level. Meanwhile, higher raw-material and energy costs are putting additional pressure on manufacturers.
VCI President Markus Steilemann warned that the latest figures should not be mistaken for a genuine turnaround.
“The increase in production and sales is encouraging, but deceptive. Stockpiling and geopolitical upheavals do not signal a trend reversal. The old problems haven't simply vanished. German industry finally needs a consistent course toward greater competitiveness. If nothing is done, the tentative recovery will quickly turn into disillusionment.”
The Middle East conflict also pushed producer prices sharply higher. Prices increased 5.7 percent from the previous quarter and were 5.3 percent above the year-earlier level.
Higher crude oil, naphtha and gas prices have added significantly to companies’ cost burdens.
The result was a sharp increase in revenue despite only modest growth in production. Slightly higher volumes combined with significantly higher prices to lift second-quarter revenue by 7.3 percent to €54.5 billion. Compared with the same period last year, revenue was up 7.6 percent.
Yet the headline sales growth masks continued weakness underneath. Order intake and revenue began falling again during the second quarter.
The German Chemical Industry Association (VCI) remains cautious about the sector’s prospects for the rest of 2026.
The association continues to forecast a 1.5 percent decline in chemical and pharmaceutical production for the full year. It expects sector sales to rise 2.5 percent, but largely because of higher producer prices rather than stronger underlying demand.
With capacity utilization still weak, costs elevated and the broader industrial economy subdued, the sector faces another difficult half-year.
For now, the second-quarter rebound looks less like the beginning of a sustained recovery and more like a temporary lift created by stockpiling, price increases and geopolitical disruption.
