German economy grew faster than estimated in second quarter
GDP rose by 0.3% between April and June, up from a preliminary estimate showing 0.2% expansion
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[BERLIN] Germany’s economy grew quicker than initially thought in the second quarter, as trade helped it maintain a long-awaited revival.
Gross domestic product rose by 0.3 per cent between April and June, up from a preliminary estimate showing 0.2 per cent expansion. Net exports were the driver, climbing by 0.2 per cent.
Elsewhere, private consumption and government spending each rose by 0.1 per cent, while capital investment unexpectedly fell by 0.2 per cent, the statistics office said on Tuesday (Aug 25).
“The growth momentum of the German economy from the beginning of the year is continuing,” Ruth Brand, president of the Federal Statistical Office, said on Tuesday in a press release. “As in the first quarter, the increase was primarily due to strong export performance.”
After years of lethargy, Germany finally seems to be embarking on an economic recovery. For the first time since the end of the pandemic, GDP has risen for three quarters in a row, with growth between January and March revised up to 0.4 per cent.
As well as exports, the upturn is coming thanks to government expenditure on infrastructure and defence. Chancellor Friedrich Merz’s coalition also announced reforms addressing taxes, pensions and bureaucracy, hoping to spur growth by attracting investment.
Higher energy prices and continued fighting in the Middle East continue to weigh, however. Record-low water levels in the Rhine river are also putting a burden on activity, the Bundesbank has said.
Economists at KfW, Germany’s state-owned development bank, raised their growth projections for 2026 to 1.1 per cent from 0.7 per cent after Tuesday’s report, even as they cautioned that the issues with the Rhine will bring momentum to a halt in the third quarter.
“We’re seeing light at the end of the tunnel,” said Dirk Schumacher, KfW’s chief economist. “There is justified hope that industrial production will pick up noticeably in the future – not only, but also, because of fiscal stimulus.” BLOOMBERG
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