The Federal Association of the Germany Confectionery Industry (BDSI) also forecasts that price increases in commodities will lead to more hard times ahead for the market.
Increased commodity prices, legislative changes, energy costs and the healthy living trend are all earmarked as having an impact on the confectionery industry.
The BDSI estimates that 3.37 million tonnes of confectionery products were produced in Germany in 2005, a slight increase of 0.3 per cent.
However, the value of production was €11.22 billion, a decline of 0.5 per cent.
Chocolate products account for the largest share of the German confectionery market, with a value of €4.12 billion.
The BDSI said this was a stablising figure for chocolate, with a production volume of 825,000 tonnes.
The second largest segment of the market is fine baked goods, where production took an upturn in 2005.
Total production was 740,000 tonnes, an increase of 2.1 per cent.
Despite slightly higher levels of production the value of fine backed goods remained the same as the previous year, at €2.23 billion.
German sugar confectionery had a similarly disappointing 2005.
Production increased by 1.3 per cent to 545,000 tonnes, yet its value fell by 1.1 per cent to €1.75 billion.
German confectionery exports were also stagnant.
Over a third of confectionery production was exported, principally to other EU countries, along with Switzerland, the US and Russia.
The BDSI report that exports increased by 0.7 per cent with a one per cent value increase.
About 1.2 million tonnes of German confectionery was exported last year, with a value of €3.33 billion.
Meanwhile domestic sales and consumption remained stable, totaling 2.61 million tonnes.
The BDSI noted confectionery companies were coming under increasing pressure from rising commodity prices.
The cost of both hazelnuts and almonds were three times higher than 2004 prices, according to the German organisation.
Other issues, such as the political situation in the Ivory Coast and EU sugar reform, were also cited by the BDSI as resulting in cost pressures.
Cocoa is currently at its highest level for 10 months, as the world's biggest producer struggles on the verge of civil war.
Although the BDSI said the German confectionery industry welcomes sugar reform, it acknowledges that price reductions are far from immediate.
The BDSI also cited rising energy costs as an added concern, which may result in product price increases.
The BDSI said that legislative measures designed to influence the publics nutritional choices through restrictions on advertising are misguided and could potentially put the survival of companies and jobs at risk.