German GDP Growth Beats Expectations in Second Quarter

The German economy grew by 0.3 percent in the second quarter, exceeding previous estimates of 0.2 percent. According to the Federal Statistical Office, this growth marks the third consecutive quarter of expansion, following a 0.3 percent increase at the end of 2025 and a 0.4 percent increase in the first three months of 2026. Ruth Brand, president of the Federal Statistical Office, attributed this momentum to strong export performance, with exports of goods and services rising by 2.0 percent compared to the first quarter.

Other economic indicators showed positive trends during the summer. The purchasing managers index for the manufacturing sector reached its highest level in over four years in August. This improvement in the industrial sector was partly driven by large state contracts for defense and infrastructure. Consequently, the Federal Association of German Volksbanks and Raiffeisenbanks doubled its annual GDP growth forecast from 0.5 percent to 1.0 percent.

Despite the growth, several headwinds persist. Investment in equipment, specifically machinery and vehicles, fell by 1.4 percent. Consumption spending remained sluggish, with both private and government spending increasing by only 0.1 percent. Additionally, the Bundesbank warned that record low water levels on the Rhine are increasing transport costs and hindering industrial production. The central bank stated that this situation will noticeably burden economic activity in the third quarter, suggesting that GDP may only increase slightly.