GDP rebounds in the second quarter

Economy grows more than initially estimated in Q2: A second national accounts release for Q2 revealed that the economy grew 0.5% in seasonally adjusted quarter-on-quarter terms, up from both the initially estimated 0.1% expansion and Q1’s 0.2% contraction. In annual terms, seasonally adjusted GDP growth was confirmed at 1.1% (Q1: +1.0% yoy).

Private consumption and fixed investments lead the recovery: Looking at the details of the release, the quarterly rebound was driven by improvements in private spending and fixed investment. Domestically, household spending increased 0.4% in the second quarter, which was twice as fast from the first quarter's 0.2% expansion. This improvement was likely due to real disposable income rising an annual 2.5%. In addition, fixed investment growth hit an over two-year high of 1.7% in the second quarter, up from the first quarter's 2.8% contraction, with changes in inventories—largely trade inventories—adding 1.1 percentage points to overall GDP. Public spending growth was steady at Q1’s 0.2% in Q2. On the external front, exports of goods and services growth fell to 0.7% in Q2 (Q1: +2.0% s.a. qoq), marking the worst reading since Q1 2024. Conversely, imports of goods and services growth sped up to 3.1% in Q2 (Q1: +0.9% s.a. qoq), marking the best reading since Q4 2021. Accordingly, net exports subtracted 1.3 percentage points from overall GDP.

GDP growth to exceed 2024’s rate in 2025: Our panelists expect sequential GDP growth to stabilize in the coming quarters, maintaining healthy momentum in H2. On an annual basis, economic growth is set to pick up from last year in 2025, marking the joint-highest rate since the post-pandemic rebound in 2021 on stronger private spending and export growth. Sustained malaise in the German manufacturing sector and further shocks in the global trade environment pose downside risks.

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