KPMG September Update: German Economic Institutes Significantly Raise 2026 Forecasts as Recovery Broadens
KPMG's September update of its Economic Key Facts Germany report finds a business sentiment landscape transformed from six months ago — institutes have upgraded, the Ifo has risen, and the Iran war impact is proving more manageable than feared.
According to KPMG's Economic Key Facts Germany (September 2026), the German economic outlook has improved markedly compared to the spring, with several leading economic research institutes significantly raising their forecasts for 2026 growth. KPMG notes that the reasons cited by the institutes for the upgrade are consistent: surprisingly strong exports, an Iran war impact that has been less severe than initially feared, and the positive revision to historical GDP data by the Federal Statistical Office (Destatis) confirming that growth at the end of 2025 and the beginning of 2026 was stronger than originally estimated.
The business sentiment picture in Germany has also shifted. The Ifo Business Climate Index rose to 88.8 points in August, up from 86.7 in July, driven by significantly better expectations and greater satisfaction with the current business situation. This reading, while still below pre-2022 averages, represents a meaningful improvement in the sentiment baseline from which German businesses are making their H2 2026 and 2027 planning decisions.
Current growth forecasts by German economic research institutes and government organisations for the calendar year 2026 range from +0.4% to +1.4%, with the most recent forecasts — particularly the Joint Economic Forecast released in September — painting a significantly more positive outlook at the upper end of that range. The span of forecasts reflects genuine uncertainty about whether the recovery's current momentum will be sustained into 2027, but the direction of revisions is unambiguously upward compared to the spring.
The German economy's structure remains relevant context for these forecasts. Services account for 70% of GDP and have been the laggard sector throughout the 2026 recovery — a fact that makes September's services PMI rebound to 52.9 particularly significant as a signal that the recovery is broadening into the economy's largest sector. At 4,470 billion euros in 2025, Germany remains Europe's largest economy and the world's third largest, meaning that the sentiment and growth data from Germany has outsized implications for suppliers, customers, and partners across the continent.
For international businesses, KPMG's September update confirms that the planning environment for Germany has improved materially since the spring. The combination of upgraded institute forecasts, improved Ifo sentiment, services sector rebound, and a smaller-than-feared Iran war impact creates a more favourable context for sales investments, market entry decisions, and customer engagement in Germany than existed six months ago. Companies that pulled back on Germany exposure during the spring pessimism should reassess that positioning in light of the September data.
