The German economy unexpectedly shrank in the second quarter, official data showed today, a bad sign for the euro zone’s traditional powerhouse as it seeks to recover from a long downturn.
Gross domestic product (GDP) in Europe’s top economy was down 0.1% from the previous quarter, according to preliminary data from federal statistics agency Destatis.
Analysts surveyed by financial data firm FactSet had expected zero growth between April and June.
The economy’s performance was hit by lower investments in several areas, including construction, although household and government consumption provided some support, the data showed.
Official data today also showed Italy’s economy contracted by 0.1% in the second quarter, with exports acting as a drag on the overall performance.
France’s economic growth however picked up in the April to June period, expanding by 0.3%.
Destatis also downgraded the result for the German economy’s first quarter to 0.3% growth, from 0.4%.
First quarter growth had been been surprisingly strong as US companies rushed to import products before tariffs came into effect, but that front-loading effect lost steam in the second quarter.
“After some good figures, it’s now back to disappointment for the German economy,” said LBBW bank analyst Jens-Oliver Niklasch.
“The impression remains that the German economy is treading water. Added to this is the rather unsatisfactory situation with high US tariffs. We will need to make some efforts in Germany to get back on a stable growth path,” the analyst added.
The German economy shrank in both 2023 and 2024 due to a manufacturing slump and weak demand for its key exports, and US President Donald Trump’s tariffs are threatening to push it into a third year of contraction in a row.
Recent indicators, including business and investor confidence surveys, had suggested that the downturn may have bottomed out and some economic institutes expect the economy to return to slight growth this year.