Unexpected tailwind in the middle of the economic flaut: The cravilating German economy in the first quarter was grown twice as much with 0.4 percent as initially estimated. This was announced by the Federal Statistical Office. Rising exports and higher consumer expenditure of consumers: Inside, the gross domestic product (GDP) caused a buoyancy to the previous quarter. Economist: On average, an average confirmation of the initial estimate had expected.
The reason for higher growth is the “surprisingly good economic development in March”, explained the President of the Federal Statistical Office, Ruth Brand. In an initial estimate, the Wiesbaden authority still assumed an increase of 0.2 percent. “Especially the production in the processing industry and exports developed better than initially assumed,” said Brand.
Private consumption expenses also rose by 0.5 percent to the previous quarter. With the departing inflation and significantly increased wages in some industries, many people have more money in their pockets. Investments also grew in buildings (plus 0.5 percent) and in equipment (plus 0.7 percent).
Is there still the third year of recession in a row?
Most recently, the positive news about the German economy had increased. In industry, rising number of order ensures a little more confidence and the mood in the economy lights up: in May the IFO index rose the fifth month in a row. According to IFO President Clemens Fuest, the German economy is slowly receding.
Many economists had expected the delicate upswing at the beginning of the year. With the sudden customs policy of US President Donald Trump, however, the prospects for German industry, which are strong of export, have deteriorated significantly. Despite the glimmer of hope at the beginning of the year, the German economy threatens the third year without growth in a row – this has never been the case in the history of the Federal Republic.
Trump has initially exposed some surcharges on imports to the USA. However, the level remains high with the general base custom of ten percent, and imports of imports from cars and steel have also been more expensive.
2025 at most stagnation expected
The forecasts for the German economy have recently been reduced in rows. The Council of Experts (“Economic”) expects only a stagnation of the domestic economy in 2025 – as well as the International Monetary Fund (IMF) and the EU Commission.
2026 could bring some growth again: the Council of Experts then expects an increase of 1.0 percent. According to economists, the planned billion dollar expenditure of the Federal Federation for Defense and Infrastructure is likely to boost the economy.
Hope for reforms and solution in the customs dispute
A relaxation in the customs dispute with the USA and reforms could also get the economy going. Federal Finance Minister Lars Klingbeil (SPD) last saw positive signals in the customs dispute after talks in the circle of the seven large industrialized countries (G7).
The economy also relies on reforms of the new federal government. According to Economic Minister Katherina Reich (CDU), the Federal Cabinet will launch a first relief package for companies until mid -July. Accordingly, a reduction in electricity tax and the first labor market reforms should be included.