German economy surprises: GDP growth to 0.4 percent!

German economy surprises: GDP growth to 0.4 percent!

The German economy achieved growth of 0.4 percent in the first quarter of 2025, which is twice as strong as previously estimated. The Federal Statistical Office (Destatis) announced these figures on Friday, which represents a positive surprise for many economists. The original estimate of 0.2 percent was revised upwards significantly. The main drivers of this growth are increasing exports and higher consumer spending by citizens.

Exports of cars and pharmaceuticals in particular made a significant contribution to the positive development. These rose by 3.2 percent compared to the previous quarter. Private consumer demand was also robust and grew by 0.5 percent, which was supported by falling inflation and rising wages. Especially in the months before the new trade conflict with the USA broke out, experts expect pull-forward effects that could have had a positive impact on the current situation.

Investments and future prospects

Investment in construction projects increased by 0.5 percent, while equipment increased by 0.7 percent. However, despite this positive news, there are no signs of a sustained economic recovery. The Bundesbank, for example, expects the economy to stagnate in the second quarter of 2025. This means that 2025 could be the third year in a row without significant growth for the German economy.

Because forecasts for 2025 tend to be cautious, economists see possible financial stimulus as necessary. The Ifo Institute expects a slightly positive growth rate, while growth of 1.0 percent is forecast for 2026. The federal government is also planning to spend billions in the areas of defense and infrastructure, which could also help stabilize the economy.

Policy measures and outlook

Planned measures, such as an initial relief package for companies, are to be presented by mid-July. These regulations include, among other things, the reduction of electricity taxes and reforms in the labor market. An easing of the trade conflict with the USA and necessary structural reforms could also have a positive impact on Germany's economic situation.

Overall, the current figures are encouraging, but it remains to be seen whether this development will remain stable or whether it will turn out to be a one-off effect. Economists such as Jens-Oliver Niklasch from LBBW and Thomas Gitzel from VP Bank are optimistic, but warn of a possible correction later in the year. [Tagesschau] reports that the positive development of the first quarter was supported by better production figures in the manufacturing sector. [ZDF] highlights that significant GDP growth of 0.6 percent was last recorded in the third quarter of 2022.