Economy stagnates in Q3 2025

Another error 404: GDP growth not found: According to a preliminary reading, Germany's GDP flatlined on a seasonally and calendar-adjusted quarter-on-quarter basis in Q3, following an upwardly revised 0.2% contraction in the previous quarter and matching market expectations. In annual terms, the economy grew 0.3% in Q3, following a 0.1% contraction in the previous quarter.

Fixed investment improves, but net exports go into reverse: The statistical office said that fixed investment strengthened quarter on quarter—a sign that businesses are taking advantage of the ECB's cumulative 235 basis points of interest rate cuts since June 2024. That said, the statistical office said that net exports weakened—a result of not only a stronger euro and recently imposed U.S. tariffs, but also from a gradual loss of competitiveness against China, particularly in the automotive industry. A complete breakdown will be released on 25 November.

GDP to grow in Q4: Our panel sees the German economy gaining some steam in Q4 as lower interest rates bolster domestic demand. Still, GDP growth will remain weak, with Trump’s tariffs dragging on the already struggling external sector. Looking to 2026, GDP growth is set to rise to the euro area average after a subdued 2025; fiscal stimulus and defense spending are poised to boost public spending growth and help fuel a rebound in fixed investment. That said, analysts have expressed concerns over the potential inefficiency of the government’s spending, a shortfall which could blunt the impact of its expansionary push.

Panelist insight: Commenting on the outlook, analysts at Berenberg stated: “While most other Eurozone member countries do not have the space to deliver a meaningful stimulus, or may even have to tighten the reins, Germany is opening the fiscal spigots. […] We expect the additional spending to lift German growth […] in 2026. A modest drop in unemployment, the spillover from the fiscal stimulus and some limited pro-growth reforms should support business and consumer sentiment and spending over time. This could then lift German growth to a cyclical peak […] in 2027. Of course, this will only hold if the global headwinds subside at least somewhat as the world gets used to Trump’s irritating tariff U-turns and if the German government does not mess up badly.”

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