The German economy contracted by 0.2% quarter-on-quarter in the final three months of December, as per preliminary data from Germany’s statistics office Destatis released on Thursday. This figure is adjusted for price, calendar, and seasonal variations. Analysts surveyed by Reuters had anticipated a 0.1% decline in the gross domestic product (GDP). While household and government consumption expenditures rose, exports were notably lower compared to the previous quarter, according to Destatis. The agency stated that after facing economic and structural challenges throughout the year, the German economy concluded 2024 in negative territory.
Carsten Brzeski, global head of macro at ING, expressed concerns about a potential winter recession resulting from the current downturn. He highlighted that Germany’s economic issues are currently centered in the industrial sector but could potentially affect other sectors due to interconnectedness. Brzeski noted that the crucial industry is not expected to see a significant recovery soon, citing persistent issues with inventories, order books, and looming tariffs on exports to the U.S.
The recent figures contrast with a 0.1% GDP growth in the third quarter of the previous year. Germany has experienced sluggish economic performance, with quarterly GDP readings mostly remaining stagnant over the past two years, managing to avoid a technical recession. On an annual basis, the German economy contracted by 0.3% in 2023 and 0.2% in 2024. A slight improvement is anticipated in 2025, with the German government revising its growth forecast to 0.3% for the year, down from the previous estimate of 1.1%.
Robert Habeck, the economy and climate minister, acknowledged the seriousness of the situation during a press conference, attributing the downward revision to internal and global political uncertainties. He mentioned that structural issues have been a long-standing challenge for the German economy. Habeck also highlighted that the outgoing government faced obstacles in implementing growth plans due to its premature end. The upcoming federal election in Germany, scheduled for Feb. 23, was moved forward following the dissolution of the ruling coalition late last year.
Both Habeck and Finance Minister Jörg Kukies emphasized the need to address the structural weaknesses in the economy to stimulate growth. Kukies stressed the importance of embarking on a path of economic growth to overcome the challenges faced by the German economy.
