German Economy Shrinks More than Anticipated in Q2

Germany’s economy contracted 0.3% qoq in Q2 2025, sharper than the preliminary estimate of a 0.1% drop and reversing the 0.3% growth seen in the previous period. It was the steepest quarterly decline since Q2 2024, driven by a fall in fixed capital formation (-1.4% vs 0.3% in Q1), reflecting weaker investment in both construction and equipment, primarily machinery, equipment, and vehicles. Net trade dragged on growth as exports slipped (-0.1% vs 2.5%), weighed by rising U.S. tariffs, while imports continued to rise (1.6% vs 1.6%). At the same time, private consumption slowed sharply (0.1% vs 0.6%) even as government spending rebounded (0.8% vs -0.3%), and inventory changes made a positive contribution. By sector, output shrank in manufacturing, construction, trade, transport, hospitality, and financial and insurance services. On a yearly basis, the economy grew 0.2%, slightly below the 0.3% expansion in Q1, though marking a second consecutive quarter of annual growth.