Europe Chart Of The Week: Defence output tracker: From paper pledges to production pressures

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Europe Chart Of The Week: Defence output tracker: From paper pledges to production pressures

Deutsche Bank

Research

Economics Date

Europe Chart Of The Week 16 July 2026

Defence output tracker: From paper pledges

Yacine Rouimi to production pressures

Senior Economist

+44-20-754-71014

Defence is one of the few clear industrial bright spots in Europe. Our new defence

output tracker suggests Europe’s defence ramp-up is visible in production data, Mark Wall

with our EU composite defence IP index around 30% higher in May 2026 Chief Economist

+44-20-754-52087 compared to the pre-Ukraine invasion level of 2021 (see Figure 1). This strength

contrasts with the rest of the manufacturing sector which lacks dynamism, Peter Sidorov, CFA

broadly stagnated over the same period. Senior Economist

+1-585-615-0253

The debate is shifting from spending to delivery. This was also the message of

our recent NATO summit notes (here and here): NATO-EU members' defence Clemente Delucia

budgets have surged from an average of 1.6% of GDP in 2021 to 2.3% in 2025. Senior Economist

+39-02-402-43012

Based on our aggregation of spending commitments, the Big 6 NATO-Europe

members intend to spend 2.8% of GDP by 2029. This rising trajectory is spilling Maria Contreras

over into production. Based on DB equity research coverage of 14 major Economist

European defence firms, sales this year are expected to be 65% above their 2021 +44-20-754-74120

levels, while the order backlog, at EUR 457bn, is almost 150% higher.

Michael Kirker

Demand is no longer the main constraint. Survey data show that defence- Economist

+44-20-754-72237

oriented firms cite demand as a limiting factor (23% as of Q226 – Figure 2) much

less often than the rest of the manufacturing sector (36%). Supply constraints are Kuhumita Bhattacharya