Germany’s GDP contraction worse than expected after tariff boost

Published on 22/08/2025 - 9:43 GMT+2

The German system shrank by 0.3% quarter-on-quarter from April to June, according to figures released by nan Federal Statistical Office connected Friday.

That’s worse than nan first estimate of -0.1% and comes aft Germany saw a GDP boost astatine nan commencement of nan year, notably arsenic companies ramped up business pinch nan US to get up of tariffs imposed by President Trump.

“Industrial production, successful particular, performed worse than initially assumed,” said nan Federal Statistical Office.

Household depletion was besides revised downwards to 0.1% owed to caller accusation disposable connected nan services sectors, specified arsenic nan monthly information connected accommodation and nutrient services for June.

Government last depletion expenditure accrued by 0.8% connected nan erstwhile quarter, while investments, nan building sector, and nett exports each registered a decline.

Despite nan autumn into recessionary territory, PMI information released connected Thursday by S&P Global — which is based connected monthly surveys of purchasing managers — painted a much optimistic picture.

“Business activity roseate for nan 3rd consecutive period crossed nan German backstage assemblage successful August, pinch nan gait of maturation ticking up to nan quickest since March but remaining only modest,” noted S&P Global connected Thursday.

This optimism successful nan look of rocky economical conditions could beryllium linked to a bullish reference of US tariffs, aliases whitethorn beryllium tied to promised fiscal stimulus from nan German government.

Germany has this twelvemonth approved a law amendment to its ‘debt brake’ rule, meaning defence spending supra 1% of GDP is not taxable to borrowing limits. The authorities has besides created a €500 cardinal extrabudgetary money for further infrastructure spending.

US tariffs are, however, already starting to constrain GDP maturation arsenic a waste and acquisition woody betwixt nan EU and nan US remains a activity successful progress.

“Recent firm results were already a achy reminder that US tariffs, but besides structural transitions, were successful afloat plaything successful nan 2nd quarter, weighing connected institution results,” said ING economist Carsten Brzeski.

He continued: “This is simply a inclination that won't alteration excessively overmuch successful nan 3rd quarter, pinch US tariffs of 15% connected astir European equipment and uncertainty complete whether (and when) nan 27.5% tariffs connected automotives will beryllium brought backmost to 15%. With 10% of full German exports going to nan US, nan caller tariffs will measurement connected economical growth.”

Annual GDP maturation came to 0.2% successful nan 2nd 4th of nan year, compared to a 0.3% reference successful nan first quarter.