FX.co ★ German Economy Shrinks More than Expected in Q2

Germany's economy experienced a contraction of 0.3% quarter-on-quarter in the second quarter of 2025, a sharper decline than the initially estimated 0.1% decrease, reversing the previous quarter's 0.3% growth. This marks the most significant quarterly decrease since the second quarter of 2024, primarily driven by a reduction in fixed capital formation, which fell by 1.4% compared to a 0.3% rise in the first quarter, reflecting diminished investments in both construction and equipment sectors. Additionally, net trade exerted downward pressure on economic growth, as exports declined by 0.1% following a 2.5% increase in the previous quarter, while imports continued to rise, increasing by 1.6%. Meanwhile, household consumption growth decelerated significantly to 0.1% from 0.6%, although government expenditure showed a rebound, rising by 0.8% after a previous decline of 0.3%, with inventory changes contributing positively. By industry, there were declines in output within the manufacturing, construction, trade, transport, hospitality, financial, and insurance services sectors. On an annual basis, the economy grew by 0.2%, slightly below the 0.3% growth recorded in the first quarter, yet marking the second consecutive quarter of year-on-year expansion.