The German economy is not gaining momentum: after a decline in the spring, gross domestic product (GDP) stagnated in the third quarter. According to preliminary data, the Federal Statistical Office calculated growth of zero percent compared to the previous quarter. Analysts on average had expected this.
According to the statisticians, investments in equipment such as machines and vehicles increased in the three months of July up to and including September. But exports fell compared to the previous quarter.
Weak demand in important sectors such as car manufacturing and chemicals is causing problems for the industry, and high US tariffs are slowing exports. Domestically, there is a reluctance to consume – also because people often have to pay more for everyday items such as food than before the corona pandemic.
The German economy is not really improving, said Commerzbank chief economist Jörg Krämer. “The federal government’s fiscal package should only stimulate the economy next year, although this is not sustainable due to the lack of reforms.”
Backlog of reforms is slowing down the German economy
Companies are struggling with high energy prices and a lot of bureaucracy. Germany must “finally wake up” and put “growth and competitiveness at the center of the political agenda,” recently warned Deutsche Bank boss Christian Sewing.
The federal government wants to stimulate the economy with a “growth booster” for improved depreciation options and a “construction turbo” for faster approvals. At the beginning of October, Chancellor Friedrich Merz promised a high pace of further reforms. “This is now happening in quick succession,” said the CDU leader on ZDF’s “heute journal”: “The autumn of reforms has long since begun.”
But in the economy, initial optimism has given way to disillusionment – also because of disputes in the black-red government coalition. And time is of the essence: 84 percent of companies now see the dilapidated transport infrastructure as a burden, as a recent survey of 1,100 companies by the employer-related Institute of the German Economy (IW) showed. “The transport infrastructure has become a brake on the German economy,” says IW expert Thomas Puls.
At most, mini-growth expected in 2025
In 2025, Europe’s largest economy could narrowly miss a third year without growth despite two negative quarters. Leading economists expect a mini-plus of around 0.2 percent.
At the start of the year there was an increase of 0.3 percent compared to the previous quarter – although this was largely because companies brought forward business for fear of US President Donald Trump’s tariff threats. According to the latest calculations, gross domestic product (GDP) shrank by 0.2 percent in the second quarter.
Trend reversal next year?
According to economists, the German economy is likely to grow somewhat more strongly in 2026, not least because of the planned billions in spending on infrastructure such as roads and rails as well as on defense. While the federal government expects an increase of 1.3 percent, the International Monetary Fund (IMF) only expects growth of 0.9 percent.
Germany’s leading economic research institutes warned in September when they presented their joint diagnosis: The German economy is still on “shaky ground”. The growth expected for 2026 will be driven primarily by government investments. In order for the upward trend to continue, fundamental reforms are needed.