Goldman Sachs(US:GS) Hua Er Jie Jian Wen·2026-02-09 04:13Core Insights - Goldman Sachs identifies a potential recovery in Germany's manufacturing sector, which is crucial for the European economy, despite recent fluctuations in industrial output [1][4]. Group 1: Economic Indicators - Germany's industrial production has been declining since its peak in 2017/18, but signs of a bottoming out were observed last year [1]. - A report indicates that January's industrial output is expected to rebound by 1.5% month-on-month following December's weakness, driven by order growth and improved business sentiment [3]. - The "Nowcasting" framework developed by Goldman Sachs shows that truck toll mileage and manufacturing sales are more accurate predictors of recent industrial output than traditional PMI data [2]. Group 2: Structural Changes in Manufacturing - The recovery in Germany's manufacturing is not uniform; significant structural disparities exist, particularly in the automotive and energy-intensive sectors, which continue to face challenges [5]. - The defense industry is highlighted as a key growth area, benefiting from expansionary fiscal policies, with expected increases in maintenance and procurement spending from 2024 to 2029 [6]. - The shift in Germany's growth narrative is moving from an export-driven model to one focused on domestic demand and security, with fiscal spending providing a stabilizing effect for the manufacturing sector [6]. Group 3: Future Outlook - Goldman Sachs' dynamic factor model indicates that while order growth is strong, it is concentrated in sectors with significant backlogs, suggesting a longer lead time for production increases [4]. - The underlying industrial momentum is at a recent high, indicating a recovery driven by domestic demand is likely in the first half of 2026 [4].