The German economy, which has been shrinking for two years now, showed its worst gross domestic product (GDP) figures in the second quarter, data in the Federal Statistical Office’s preliminary report released on Friday has revealed.
The country’s GDP at the end of July showed a contraction of 0.3 per cent, significantly worse than the shrinking of 0.1 per cent in the April-June quarter.
The disappointing numbers for Europe’s biggest economy are responsible for the lackluster showing for the 20-nation Eurozone.
The complete data also reveals a lull in manufacturing output and construction industry, along with a revised downward of household spending.
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Germany’s Chancellor Friedrich Merz's administration has made revitalising the country’s growth a top priority since taking office May 6 with promises to cut red tape and speed up the country’s lagging digitisation.
It also launched a programme to encourage investment and set up a 500 billion-euro (USD 582 billion) fund to pour money into Germany's creaking infrastructure over the next 12 years.
Last month, a group of dozens of companies pledged to invest at least 631 billion euros (USD 731.7 billion) in Germany over the next three years, a move that inspired confidence in the country’s economy.
ING economist Carsten Brzeski said the first full-blown effect of US tariffs on German economy was now becoming apparent.
“After the surge in economic activity resulting from the US front-loading of German exports in the first quarter, the economy experienced a reversal of the front-loading effect, and the first full-blown impact of US tariffs (implemented in the second quarter) took effect.”
He said it could “take until next year before a more substantial recovery starts to unfold,” even while a European Union-US trade deal reached last month remains a work in progress.
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