Economy of Germany experiences a minimal contraction during the second quarter of 2025
In a recent announcement, the Federal Statistical Office (Destatis) reported that Germany's GDP contracted by 0.1 percent in the second quarter of 2025 compared to the previous quarter. This follows a 0.3 percent expansion in Q1, marking a slowdown in economic momentum after a positive start to the year.
The decrease in GDP was mainly due to lower investments in equipment and construction. Destatis highlighted this reduction in investment spending as a key factor contributing to the GDP shrinkage.
The export-reliant German economy has been under pressure from recent U.S. tariffs, leading to weaker foreign demand and a decline in shipments to the U.S. by 2.1% in June, the third consecutive monthly drop to its lowest level since early 2022.
Despite these challenges, both private consumption and government spending increased in Q2, partially offsetting the downturn caused by weaker investment and export difficulties. However, the overall GDP contracted due to the significant impact of the investment decline and export pressures.
Interestingly, the GDP in the first quarter of 2025 was higher than in the same quarter of the previous year, adjusted for price and calendar, although the exact percentage is not specified in the provided information. The GDP figures for this quarter were also price-, season-, and calendar-adjusted, as previously announced by Destatis.
The announcements regarding the GDP figures in both quarters were preliminary findings from Destatis. The revised growth rate of GDP in the first quarter of 2025 compared to the previous quarter, as announced by Destatis, is now +0.3 percent (originally reported as +0.4 percent).
It's worth noting that there was one fewer working day in the second quarter of 2025 compared to the same quarter in 2024. Despite this, the GDP in the second quarter of 2025 was at the same price-adjusted level compared to the second quarter of 2024.
The findings were announced by Destatis on Wednesday. As the economy continues to navigate these challenges, further analysis and adjustments to policies may be required to support economic recovery.
The contraction in Germany's GDP in the second quarter of 2025, largely due to reduced investments, has raised concerns within the industry, potentially affecting the overall financial outlook. Consequently, the Federal Statistical Office (Destatis) emphasized that the decline in investment spending was a significant contributor to the GDP shrinkage.
