Economy German economy grows only minimally in the third quarter

Growth instead of contraction: the German economy grew surprisingly in the third quarter - albeit less than initially expected. It remains a wafer-thin plus.

The German economy grew only minimally in the third quarter. From July to September, gross domestic product increased by 0.1 percent compared to the previous quarter, according to a second estimate by the Federal Statistical Office. At the end of October, the Wiesbaden-based authority had calculated growth of 0.2 percent for Europe's largest economy based on preliminary data.

One of the main reasons for the mini-growth is that consumers are more willing to spend: Now that the wave of inflation has subsided and in view of rising wages, many people are finding their money a little looser again. An upturn in consumption is the most important hope for the ailing German economy. In addition, higher government spending saved the German economy from a recession by a hair's breadth in the third quarter. Exports, on the other hand, fell significantly.

German economy on the brink of recession

In the second quarter, gross domestic product had already fallen by 0.3 percent. If GDP had shrunk again in the third quarter, the German economy would have slipped into a "technical recession" according to the usual definition. Economists refer to this as a decline in two consecutive quarters.

Despite the latest ray of hope, the German economy remains in a weak phase, which the Bundesbank expects to continue in the current final quarter. There are plenty of headwinds: China has lost momentum as a growth driver on the global markets, while the number of company bankruptcies is rising sharply in Germany.

At the same time, the export outlook for industry is bleak and comparatively high energy prices and a high level of bureaucracy are weighing on Germany as a business location. Key industries such as chemicals and the automotive sector are in crisis. Car manufacturer Ford, for example, is planning to cut 2900 jobs in Germany and Volkswagen is threatening to close plants.

According to economists, falling key interest rates from the European Central Bank, which tend to make loans cheaper for companies and consumers, should have a positive effect on the economy. However, it will be some time before the impetus from interest rate cuts is reflected in the real economy.

Much uncertainty due to Trump and the end of the governing coalition

Uncertainty has also increased significantly following Donald Trump's election victory in the US and the break-up of the coalition government in Germany. Some economists have already lowered their forecasts for the German economy. This is because if Trump were to increase tariffs as announced, the export-oriented German economy would be hit particularly hard.

The German government expects gross domestic product to shrink by 0.2 percent this year. It would be the second year of recession in a row after 2023, when the economy had already contracted slightly. According to the German government, the German economy is set to recover next year with growth of 1.1%. By contrast, the German Council of Economic Experts expects growth of just 0.4 percent in 2025.

SDA