The German economy expanded by 0.2% qoq in Q3 2026, slowing from growth of 0.3% in Q2 but exceeding expectations of a 0.1% increase, according to preliminary estimates. Household and government consumption edged up, while capital formation declined. Also, low water levels on the Rhine weighed on industrial activity, while persistently high energy prices continued to constrain the sector. Meanwhile, the strong export momentum seen in the first half of the year lost considerable steam in Q3. On a year-on-year basis however, GDP grew by 1.2%, marking the strongest annual growth rate in four years. This compares with growth of 1% in Q2 and exceeds forecasts of 1.1%. The German government has raised its forecast for economic growth to 1.3% in 2026 and 1.1% in 2027, from 0.5% and 0.9% respectively. “Fiscal stimulus from the special funds and defence spending is expected to have a noticeable impact on public investment and government consumption by 2028″, the government said.