By Christian Kraemer and Linda Pasquini
BERLIN, Nov 5 (Reuters) - The German Chamber of Commerce and Industry on Thursday raised its 2026 growth outlook for Europe's largest economy to 1% from 0.3% but said debt-financed public spending was largely driving the expansion.
"The government is spending money on infrastructure and defence, and exports are providing some tailwind. We are still a long way from self-sustaining growth," said the chief executive of the lobby group, Helena Melnikov, in a statement.
In its poll of 23,000 German businesses, 26% of respondents rated their current business situation as good, up 3 percentage points from early summer, while 23% of companies rated it as poor.
Analysts broadly agree that Germany is emerging from a prolonged slowdown, but many stop short of calling the recovery self-sustaining because private investment remains weak.
The German government expects the economy to grow by 1.3% in 2026 and 1.1% in 2027, while the chamber of commerce sees 2027 growth at 1%.
Despite higher prices fueled by the Iran conflict and uncertainty caused by trade tensions, the German economy has shown resilience and grew by 0.2% in the third quarter.
AUTOMAKERS IN CRISIS
But that growth is overshadowed by a deep crisis in Germany's auto industry, a traditional pillar of the economy, as it struggles with US tariffs, growing competition from cheaper Chinese imports and a costly shift to electric vehicles.
In September, the sector's new orders rose by 10.5%. But the statistics office said on Thursday that the increase reflected weak orders in previous months, caused in part by production changes and plant shutdowns during the summer holiday season.
The rise in auto industry orders contributed to a 4.4% increase in overall industrial orders on a seasonally and calendar-adjusted basis.
A Reuters poll of analysts had pointed to a rise of 4.8%.
(Reporting by Christian Kraemer and Linda Pasquini, writing by Thomas Seythal, editing by Gareth Jones)