The World Today
The German economy suffered a much more severe contraction in the second quarter of the year than initially estimated, with gross domestic product (GDP) falling 0.3% compared to the previous three months, instead of the 0.1% decline initially estimated by the Federal Statistical Office (Destatis).
Thus, Europe's largest economy experienced a marked decline between April and June compared to the 0.3% expansion observed in the first quarter, when companies accelerated their purchases from Germany in anticipation of US tariffs.
In fact, the contraction in German GDP in the second quarter reflects the negative contribution of exports, with a decline of 0.1%, compared to growth of 2.5% in the first quarter, due to a drop in exports of goods (-0.6%), while exports of services increased by 1.4%, while imports of goods and services increased significantly again, by 1.6%.
Similarly, final consumption expenditure in the second quarter of 2025 increased by 0.3% compared to the first quarter of 2025, including a marginal increase of 0.1% in household consumption, compared to 0.6% in the first quarter, while government final consumption expenditure increased by 0.8% compared to the previous quarter, when it had decreased by 0.3%.
For its part, gross fixed capital formation decreased significantly (-1.4%) in the second quarter of 2025, after registering a slight increase (0.3%) at the beginning of the year.
The German economy's performance in the second quarter was thus significantly lower than that of the major economies of the European Union (EU), with Spain's GDP growing by 0.7%; France's by 0.3%; while Italy's contracted by 0.1%. Meanwhile, the EU as a whole grew by 0.2% and the United States by 0.7%.
EMPLOYMENT
On the other hand, Destatis reported that this economic performance, which represented an increase of just 10,000 people (0%) compared to the second quarter of 2024.
Between April and June 2025, employment declined steadily in the manufacturing and construction industries, while employment increased in the services sector.
On average, fewer hours were worked per person employed than in the second quarter of 2024 (-0.5%). The workload in the economy as a whole also decreased by 0.5% over the same period.
For its part, overall labor productivity (GDP adjusted to prices per hour worked by employed persons) increased by 0.3% compared to the second quarter of 2024, according to provisional calculations, while labor productivity per employed person decreased by 0.2% compared to the same quarter of the previous year.
