Federal Statistical Office: Economy grows stronger than expected

Wiesbaden. Unexpected tailwind amid the economic downturn: The struggling German economy grew by 0.4 percent in the first quarter, twice as fast as initially estimated. This was announced by the Federal Statistical Office. Rising exports and higher consumer spending boosted gross domestic product (GDP) compared to the previous quarter.

The reason for the higher growth was the "surprisingly good economic development in March," explained Ruth Brand, President of the Federal Statistical Office. In an initial estimate, the Wiesbaden-based agency had expected an increase of 0.2 percent. "In particular, production in the manufacturing sector and exports developed better than initially expected," Brand said.

Exports, such as those of cars and pharmaceuticals, particularly supported the economy in the first quarter. "Anticipatory effects in the simmering trade conflict with the USA are likely to have contributed to this positive development," the statisticians wrote.

Private consumption expenditure also rose by 0.5 percent compared to the previous quarter. With declining inflation and significantly increased wages in some sectors, many people have more money in their pockets. Investments also grew in both construction (up 0.5 percent) and equipment (up 0.7 percent).

Recently, positive news about the German economy has been mounting. Rising orders in industry are providing some optimism, and the economic mood is brightening: In May, the Ifo index rose for the fifth consecutive month. According to Ifo President Clemens Fuest, the German economy is slowly regaining its footing.

Many economists had expected the slight upturn at the beginning of the year. However, with US President Donald Trump's erratic tariff policy, the outlook for Germany's export-oriented industry has deteriorated significantly. Despite the glimmer of hope at the beginning of the year, the German economy is facing a third consecutive year of no growth in 2025 – something unprecedented in the history of the Federal Republic.

Although Trump has temporarily suspended some surcharges on imports to the US, the general base tariff of 10 percent remains high, and the US has also increased the prices of imports of things like cars and steel.

Forecasts for the German economy have recently been lowered in a series of ways. The German Council of Economic Experts (“Wirtschaftsweise”) now expects only stagnation of the domestic economy in 2025, as do the International Monetary Fund (IMF) and the EU Commission.

2026 could bring some growth again: The Council of Economic Experts expects an increase of 1.0 percent. According to economists, the federal government's planned billions in spending on defense and infrastructure should boost the economy.

A relaxation of the tariff dispute with the US and reforms could also boost the economy. Federal Finance Minister Lars Klingbeil (SPD) recently saw positive signals in the tariff dispute following talks among the seven major industrialized nations (G7).

The economy is also counting on reforms from the new federal government. According to Economics Minister Katherina Reiche (CDU), the federal cabinet will launch an initial relief package for companies by mid-July. It will include a reduction in the electricity tax and initial labor market reforms.

RND/dpa