Economy rebounds in the third quarter

Growth surprises markets on the upside but remains muted: According to a preliminary reading, Germany continued its pattern of swinging in and out of the doldrums in the third quarter, expanding 0.2% on a seasonally adjusted quarter-on-quarter basis after having contracted by 0.3%—which was downwardly revised from a previously estimated 0.1% decline—in the second quarter. The reading beat market expectations of a recession but fell short of the Euro area average of 0.4%. On an annual basis, economic growth improved to 0.2% in Q3 from the previous period's 0.1% growth, marking the strongest increase since Q1 2023.

Private and public consumption support economy: While not providing a complete breakdown, the statistical office noted that Germany’s quarterly upturn partially reflected rebounding private spending and an expansion in public expenditure. A complete breakdown of the GDP figures will be released on 22 November.

Economy to gain traction but to remain subdued: Our panelists expect the economy to be expanding at a similar sequential clip to Q3 in the current quarter, before picking up the pace in 2025 on the back of ongoing monetary policy easing, lower inflation, a slight recovery in the industrial sector and stronger EU demand. That said, growth will remain uninspiring in 2025, with Germany set to remain the G7’s laggard. Increased U.S. protectionism under a Trump administration is a downside risk.

Panelist insight: ING’s Carsten Brzeski commented: “Since the start of the pandemic, quarterly growth has stagnated on average. And at the risk of sounding like a broken record, the current state of the German economy is the result of both cyclical and structural headwinds. The pandemic and the war in Ukraine have accelerated the structural weakness but are not the original reasons for the current situation. […] On a more positive note, last week’s rebound in the PMIs and the Ifo index suggests that the German economy can at least avoid a severe recession and is rather likely to move horizontally over the coming months. The main risks are possible US tariffs on European goods and a self-reinforcing negative loop on the back of more disappointing corporate news and few new policy answers from the German government.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects German GDP projections for the next ten years from a panel of 58 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for German GDP.

Download one of our sample reports to visualize what a Consensus Forecast is and see our German GDP projections.

Want to get access to the full dataset of German GDP forecasts? Send an email to info@focus-economics.com.