Germany GDP

Economic growth ebbs in Q2 2026

GDP growth eases but exceeds estimates: According to a preliminary estimate, Germany's GDP increased 0.2% on a seasonally adjusted quarter-on-quarter basis in Q2, below 0.4% growth in the previous quarter, but exceeding market estimates. Over the past years, Germany’s GDP growth has remained weak and uneven, but has gradually shifted toward modest expansion since the end of 2025, pointing to a fragile recovery due to fiscal stimulus plus reforms to tax, pensions, labor markets and the bureaucracy. In annual terms, economic output expanded 0.9% in Q2, following a 0.8% expansion in the previous quarter.

Private spending and investment outweigh trade gains: A full breakdown is not yet available, but the statistical office stated that consumer spending remained subdued and investment declined; higher inflation likely eroded consumer purchasing power, and the current high level of geopolitical uncertainty probably weighed on investment. In contrast, exports strengthened, with energy-intensive industries likely benefiting from higher foreign demand. A full breakdown by expenditure subcomponents will be available on 25 August.

GDP growth to remain timid: Looking ahead to Q3, economic growth is likely to remain timid as high inflation continues to weigh on private consumption, while growth in government spending and exports also likely remains subdued. Historically low water levels on major inland waterways are also creating supply bottlenecks for regional industries, potentially shaving 0.1–0.2 percentage points off GDP growth in Q3. On the upside, infrastructure and defense spending should provide some support. Still, downside risks remain, including persistently high energy prices, geopolitical uncertainty and financing costs, which could delay private investment and offset part of the boost from infrastructure and defense spending.

Panelist insight: Commenting on the outlook, EIU analysts stated: “An emerging downside risk is the impact of prolonged drought conditions in the Rhine river. Persistent high temperatures due to heatwaves throughout Europe have reduced water levels, reducing the load capacity of cargo vessels by as much as 80%. The Rhine is a key industrial logistical corridor for German industries, typically transporting 285m tonnes of cargo annually. We will revisit our real GDP growth forecast of 0.7% in 2026, with an inclination to revise growth downwards.”

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