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• The latest indicators show a robust start to Q4 of 2025: there are indications of a stabilisation in industry, with another increase in production and an appreciable rise in domestic orders in October. Thanks to more dynamic demand from the EU, exports lately remained on a six-month high. However, the sentiment and leading indicators are painting a mixed picture for the coming months, with business expectations and consumer sentiment, in particular, showing a slight decline. As the end of the year approaches, the German economy is continuing to experience the tension between a challenging situation for foreign trade and investments on the one hand and gradual domestic stabilisation on the other.
• Output in the goods-producing sector increased by 1.8 per cent between September and October, adjusted for price, calendar, and seasonal effects. However, the three-month comparison shows a negative trend (-1.5 per cent). Overall, in calendar-adjusted terms, the goods-producing sector expanded its output by 0.8 per cent year-on-year. In the industrial sector, output roughly remained the same year-on-year (-0.1 per cent). Despite a low volume of orders from abroad and supply bottlenecks for imports of intermediate products, the recent increase in domestic demand for capital goods suggests that the economic situation in the industrials sector is stabilising.
• Price-adjusted retail sales (seasonally adjusted, excluding motor vehicles) fell by 0.3 per cent in October compared with the preceding month. Year-on-year, retail turnover increased by 0.8 per cent in October, with food sales up 1.7 per cent and non-food sales up +1.0 per cent. Private car registrations rose by 4.8 per cent compared with the preceding month, and by 9.3 per cent in the three-month comparison. Overall, the most recent sentiment indicators point to relatively subdued consumer activity in Q4 2025 and in the important run-up to Christmas.
• The inflation rate remained at 2.3 per cent in November. The trend towards services being the main drivers of inflation continued (+3.5 per cent). The core inflation rate gave way a little, but at an elevated level. Goods were 1.1 per cent more expensive, food prices were up 1.2 per cent. Energy continued to ease inflation, but to a lesser extent than during the summer. The trend follows the expected path; inflation is expected to remain at just above 2 per cent until the end of the year.
• The number of unemployed persons remained almost stable in November, increasing by one thousand on a seasonally adjusted basis. Gainful employment also remained almost unchanged in October (-2,000 persons), whilst employment subject to social-security contributions increased by 12,000 in September. In light of the weak economic development so far, a revival on the labour market is not currently in sight.
• According to official statistics, corporate insolvencies increased by 2.0 per cent in September compared with August, reaching 1,940 filed cases; a figure that is up 6.7 per cent year-on-year. The bankruptcy indicator of the German Economic Institute (IWH) in Halle indicates a 17 per cent reduction in the number of cases of insolvencies of partnerships and corporations in November compared to October.

• According to its flash estimate for the third quarter, the Federal Statistical Office reports that GDP remained essentially flat. This follows a slight upward revision of GDP growth for the second quarter. Positive impulses came from domestic demand, driven in particular by investment in plant and equipment such as machinery, industrial systems and motor vehicles. By contrast, exports declined, reflecting increased trade barriers, which in turn likely dampened overall GDP growth. On the production side, the services sector is expected to have provided a modest contribution to growth, while value added in both industry and construction likely continued to fall. Current leading indicators paint a mixed picture, shaped not only by geopolitical tensions but also by uncertainties surrounding the supply of key intermediate goods.
• In September, production in the manufacturing sector (adjusted for price, calendar, and seasonal effects) rose by 1.3 per cent compared with the previous month, after falling by 3.7 per cent in August – a decline largely attributable to one-off factors in the automotive industry, including factory holidays and production adjustments. Industrial output increased by 1.9 per cent month-on-month, with production of capital goods expanding particularly strongly, up 3.8 per cent. Energy production also posted a positive result, rising by 1.3 per cent, while construction output declined by 0.9 per cent. Manufacturing output in the third quarter fell by 0.8 per cent compared to the previous quarter.
• Price-adjusted retail sales (seasonally adjusted and excluding motor vehicles) remained flat in September compared with the previous month. Compared with September last year, overall retail sales edged up by 0.2 per cent. Breaking this down, food retailers recorded a modest increase of 0.3 per cent, while sales of non-food goods fell by 0.8 per cent. Private car registrations rose by 2.7% in October compared with the previous month, and by 9.2% in the three-month comparison. Year-on-year, registrations by private individuals were up by a substantial 12.0 per cent. Despite this, current sentiment indicators still point to relatively subdued consumer activity as the year draws to a close.
• The inflation rate eased slightly in October, falling to 2.3 per cent. Services continued to be the key driver of price growth, with core inflation stable at 2.8 per cent – unchanged from the previous month and still at an elevated level. Energy prices continued to exert a dampening effect, coming in 0.9 per cent lower than a year earlier. Inflation is expected to remain stable at just above 2 per cent through to the end of the year.
• The labour market showed little movement in October. The number of unemployed remained virtually unchanged, declining by only one thousand on a seasonally adjusted basis. Employment fell again in September, down by 20,000, and employment subject to the payment of social security contributions also declined in August, down by 17,000. Given the stagnation of GDP in the third quarter, significant near-term improvement in labour market conditions appears unlikely.
• According to the IWH insolvency trend, insolvencies among incorporated and unincorporated firms rose by 5 per cent in October compared with the previous month.

• Current economic indicators show no signs of recovery in the third quarter. In particular, weaker external conditions – including a slowdown in global activity and the growing impact of higher US tariffs – are weighing on German exports, particularly to the United States. Industrial production is being held back by falling foreign orders, although part of August’s decline reflects special factors in the automotive sector due to later factory holidays. By contrast, domestic sectors such as construction and consumer and business-related services are showing signs of stabilisation. Overall, however, economic momentum in Germany remains subdued at the start of the second half of the year.
• Manufacturing output fell noticeably in August, down 4.3% on the previous month after adjusting for prices, calendar and seasonal effects. Industrial output declined by 5.6%, driven mainly by a sharp 18.5% drop in motor vehicles and parts, partly due to holiday-related effects. Production also decreased across a wide range of industrial sectors. Energy output slipped by 0.5%, continuing its downward trend since June. In contrast, construction output rose by 0.6%, marking its third consecutive monthly increase.
• Retail sales (price-adjusted, seasonally adjusted, excluding motor vehicles) fell again in August by 0.5% compared with July, following an upward revision to the previous month’s figure. Year on year, retail turnover was 1.5% higher, with food sales down 0.9% and non-food sales up 3.1%. Private car registrations rose by 5.0% in September compared with the previous month, and by 11.8% in the three-month comparison. Overall, consumer sentiment points to a muted spending trend in the second half of 2025.
• The inflation rate edged up slightly in September, rising to 2.4%, driven mainly by services. Core inflation remained elevated at 2.8%, while energy prices continued to ease, standing 0.7% lower than a year earlier. Inflation is expected to remain broadly stable at just above 2% through to the end of the year.
• The number of unemployed people rose slightly in September, up 14,000 on a seasonally adjusted basis. Total employment dipped marginally in August (-8,000), while jobs subject to social security contributions edged up again in July (+8,000). Given the recent weak economic performance and the rather mixed signals from leading indicators, prospects for a noticeable autumn upturn in the labour market remain subdued.
• According to official statistics, corporate insolvencies increased by 12.3% in July compared with June, reaching 2,197 filed cases, and were 13.4% higher than a year earlier. The IWH insolvency trend for both incorporated and unincorporated firms indicates a further 5.1% rise in September compared with the previous month.

• The economic recovery that started in mid-2024 was interrupted by a contraction of GDP in Q2 that was considerably stronger than had been expected. The main reason for this are special effects resulting from the frontloading of exports to the United States in Q1, which then caused a fallback in Q2. Domestic demand, however, also weakened markedly in Q2. The latest sentiment indicators for the business sector and the figures on new orders are signalling an economic recovery, while consumer confidence among private households has returned to a lower level recently. Overall, the economic recovery is likely to remain subdued in Q3, with the economic and fiscal policy measures of the Federal Government having more of an effect later in the year.
• Output in the goods-producing sector expanded by 1.3% in price-, calendar- and seasonally adjusted terms in July, driven mainly by machinery (+9.5%), the automotive industry (+2.3%) and pharmaceuticals (+8.4%). The construction sector increased its output by a small margin (+0.3%), whereas energy generation decreased considerably (-4.5%). The upwards revision of the data for June shows stagnation overall in the three-month comparison, with growing output from the automotive industry (+4.2%), but shrinkages in other industries. Overall, there a signs of stabilisation in industrial output, emanating from the most important industries, but, at the same time, insecurity and geopolitical risks are persisting.
• Price-adjusted retail turnover (adjusted for season, excluding motor vehicles) fell 1.5% between June and July. Year-on-year, the retail trade reported a real increase in turnover of 1.8%, mostly because online and mail-order retail expanded by 14.0%. Private passenger car registrations in July were down 2.0% month-on-month, whilst the three-month comparison shows an increase of 8.5%. The latest sentiment indicators are still not showing any trend towards greater consumer optimism. In the face of a tense labour market and geopolitical uncertainty, consumers are hesitant to buy.
• The inflation rate rose further to 2.2% in August. The key driver here continues to be the services sector, although prices are clearly rising at a smaller pace. The core inflation rate has remained stable throughout the year so far, at around 2.7%. Energy prices are continuing to slow down inflation, having dropped 2.4% year-on-year in August. The inflation rate is expected to stand at around 2% for the remainder of the year.
• The typical increase in unemployment in August led the unemployment rate to exceed the threshold of three million people. In seasonally-adjusted terms, however, unemployment stabilised recently. Given that demand for labour has been weak and that employment prospects in many sectors continue to be limited, a marked revival of the labour market is likely to be some time away.

• As expected, Germany’s economic performance slowed down in Q2. According to a flash estimate from the Federal Statistical Office, GDP decreased by 0.1% quarter-on-quarter, (adjusted for price, seasonal, and calendar effects). The decline in GDP seems to primarily result from the fact that exports were brought forward to Q1, causing a reduction in exports in Q2 – especially exports to the USA. By contrast, consumption increased while investments fell. Irrespective of an overall weak economic trend, sentiment among businesses has been appreciably brightening in recent months. However, despite the agreement in principle that has been reached between the EU and the USA and despite the latest brightening in sentiment among companies, this has yet to translate into a palpable economic recovery.
• Output from the manufacturing sector fell 1.9% between May and June (adjusted for price, seasonal and calendar variations). As industrial production receded considerably (-2.8%), output from the construction sector expanded mildly (+0.7%), with energy generation up a strong 3.1%. At the same time, new manufacturing orders fell 1.0%. Whilst companies’ export expectations brightened a little in July, the fact that tariffs on exports to the USA are likely to remain at a higher level means that industrial activities are likely to be characterised by dampened foreign demand for the immediate future.
• Price-adjusted retail sales (seasonally adjusted, excluding motor vehicles) fell by 0.9% over the preceding month. Compared with June of the preceding year, retail sales recorded a marked real increase of 4.6%, notably driven by a 20.4% rise in internet and mail-order sales year-on-year. Private passenger car registrations in July rose by 11.8% month-on-month and by a more moderate 4.9% in the three-month comparison. The sentiment indicators still do not suggest a shift in what is a fairly weak consumer sentiment – not least as consumers seem to follow the economic development with increasing scepticism.
• The inflation rate remained unchanged in July, standing at +2.0%. Noticeable relief once again came from energy prices, while the increase in food prices stabilised. The core inflation rate also remained unchanged month-on-month (+2.7%). Price pressure in the services sector is continuing, but has slowed down. Inflation is expected to stabilise at the current level over the course of the year.
• The job market continues to perform weakly into the summer months: while unemployment rose in July, as is typical of the season, employment in June fell by 19,000 persons in figures adjusted for season. While the leading indicators have brightened a little, it is likely that the poor economic development observed recently will continue to cause stagnation on the job market into the second half of the year.

• Following the economic upturn at the start of the year, a weaker momentum has emerged in the second quarter. Despite improved business expectations, industrial production and incoming orders remain volatile. Foreign trade weighs on growth, as exports, especially to the USA, declined after earlier pull-forward effects. The domestic economy shows a mixed picture: declining retail sales recently contrast with increases in private passenger car registrations and rising revenues in the hospitality sector. Persistent geopolitical uncertainties and a continuously weak labour market are dampening private consumer sentiment. Overall, the recovery in the second quarter appears to be losing momentum – partly due to fading pull-forward effects and persistent uncertainty surrounding U.S. trade policy.
• Output in the manufacturing sector increased in May by 1.2% month-on-month, adjusted for price, calendar, and seasonal effects. While industrial output rose by 1.4% and energy production saw a strong increase of 10.8%, construction output declined sharply by 3.9%. In the same period, new manufacturing orders fell by 1.4%. Although the industrial sector has maintained a positive trend since the beginning of the year, another downturn in the manufacturing outlook cannot be ruled out given the persistently high trade and geopolitical uncertainties.
• Price-adjusted retail sales (seasonally adjusted, excluding motor vehicles) decreased by 0.9% in May compared with the previous month. Compared with June 2024, however, retail sales in June reported a real increase of 2.5%. Private passenger car registrations rose by 2.0% in June; however, in the more meaningful three-month comparison, they increased only by 0.4%. Leading indicators for consumer development currently present a mixed picture following a slight rebound in private spending in the first quarter of 2025.
• The inflation rate fell to +2.0% in June. Noticeable relief once again came from energy prices, while price pressures on food continued to ease. The core rate stood at +2.7%, slightly lower than in May. This was due to easing price pressures on both goods and services. Inflation is expected to stabilise at its current level over the course of the year.
• No labour market recovery is in sight at the end of the second quarter either. Employment stagnated in May, while unemployment increased again in June by 11,000 persons, a slightly stronger increase than is typical for the season. Leading indicators offer no signs of improving employment prospects for the third quarter.
• According to official data, the number of corporate insolvencies increased in April 2025 by 6.6% compared with the previous month and by 11.5% compared with April 2024. The IWH insolvency monitor for partnerships and corporations shows a decline of 3.9% for June 2025 compared with the previous month. Compared with June 2024, this represents an increase of 22.6%.
   

• The overall economic momentum in the first quarter was somewhat stronger than initially reported, with GDP rising by 0.4% quarter-on-quarter after adjusting for price, seasonal and calendar effects. Alongside a continued recovery in private consumption and a revival in investment activity, pull-forward effects in exports linked to announced US tariffs also played a role. Current sentiment indicators remain at a low level and present a mixed picture; uncertainty regarding US trade policy remains very high. Consequently, despite expectations of stabilising private consumption, another externally driven slowdown of the German economy cannot be ruled out for the remainder of the year.
• Industrial output declined by 1.4% month-on-month in April (price, calendar and seasonally adjusted), following a marked increase in March. Both manufacturing (-1.9%) and energy production (-1.6%) decreased, while construction output rose significantly by 1.4%. In contrast, new manufacturing orders continued to grow, albeit more modestly, up 0.6%. The very volatile developments in certain sectors likely reflect the trade policy disruptions caused by US tariff measures.
• Real retail sales (excluding motor vehicles) fell by 1.1% month-on-month in April, after being revised sharply upwards to +0.9% in March. Compared to April 2024, retail trade reported a real sales increase of 2.3%. New passenger car registrations decreased by 5.6% in May following a strong increase in the previous month; the more reliable three-month comparison shows a 2.4% decline. Compared to May 2024, registrations rose by 1.2%. Leading consumer indicators mostly point to a modest improvement in the still subdued consumer sentiment.
• Inflation remained steady at 2.1% in May. Food price inflation stayed comparatively high at 2.8%, while energy prices dropped significantly by 4.6% compared to the previous year. The core inflation rate declined slightly to 2.8% in May. Going forward, inflation is expected to stabilise at the current level. Moderate upward pressure on energy and commodity prices is being offset by less dynamic wage growth under collective agreements and subdued overall demand.
• After a weak spring rebound, no labour market improvement is expected in the second quarter either. Seasonally adjusted unemployment increased by 34,000 in May, while employment almost stagnated in April, rising by only 3,000. Leading indicators improved slightly in May but continue to point to a subdued labour market outlook.
• Official data show a 3.6% month-on-month decline in corporate insolvencies in March 2025, but a 10.6% increase compared to March 2024. This resulted in a total 13.1% rise in insolvencies for the first quarter compared to the previous year. The IWH insolvency monitor for corporations recorded a 9.1% drop in May compared to April, but a 17.0% increase relative to May 2024.

• In the first quarter of 2025, the German economy posted a modest recovery, with GDP increasing by 0.2% quarter-on-quarter, adjusted for prices, seasonal and calendar effects. The rebound was primarily driven by private consumption, investments and foreign trade – due to frontloading effects in anticipation of the announced US tariffs. In addition to a revival in consumer-related services, both manufacturing and the construction sector also benefited from favourable conditions, reflected in rising output and more positive sentiment indicators. Nevertheless, business expectations, particularly in the export-oriented manufacturing industry, remain subdued. As a result, a renewed economic slowdown as the year progresses cannot be ruled out.
• By the end of Q1, output in the manufacturing sector rose sharply, climbing by 3.0% month-on-month (adjusted for prices, seasonal and calendar effects). Industrial production and construction output saw a robust increase of 3.6% and 2.1% respectively. However, energy production fell by 1.8%. New manufacturing orders – especially from abroad – also picked up noticeably in March, rising by 3.6% compared to the previous month (adjusted for prices, seasonal and calendar effects). Here too, frontloading effects related to the expected US tariff hikes likely played a role.
• In March, price-adjusted retail turnover (excluding motor vehicles) edged up by 0.4% month-on-month. Compared to the same month last year, retailers reported a real sales increase of 3.0%. Meanwhile, new car registrations in April rose sharply, increasing by 10.6% over March. However, the more meaningful three-month comparison shows a decline of 6.9%. Year-on-year, April registrations were down slightly (-0.2%). Current leading indicators point to a slight improvement in consumer sentiment, through starting from a low level.
• In April, the inflation rate eased further, falling to 2.1%. The rise in food prices has weakened again but remains above the overall inflation rate, while energy prices declined noticeably. In contrast, core inflation saw a marked rise. Going forward, inflation is expected to remain around the 2% mark, helped by falling energy and commodity prices, moderate increases in collectively agreed wages and subdued overall demand.
• Despite a weak spring revival, the labour market performed slightly better in April compared with the previous months. Seasonally adjusted unemployment rose by just 4,000, while total employment increased by 6,000 in March. However, given the continuing high level of uncertainty stemming from US trade policy and the persistently weak employment outlook, a turnaround in the labour market is not yet in sight.
• According to official data, the number of corporate insolvencies rose by 13.0% in February 2025 compared to the previous month, and by 15.9% year-on-year. With 2,068 applications filed, this marked the highest monthly figure since July 2015. The IWH Insolvency Monitor also rose, with April seeing an 11.4% increase in insolvencies among partnerships and corporations compared to March.
   

• The German economy finds itself in turbulent waters: the tariff hikes announced and then suspended by the U.S. have increased global levels of uncertainty, caused turbulences on the financial markets and dampened the global outlook for trade and growth. Consumer-related services saw a slight recovery at the beginning of the year, but the situation in the goods-producing sector and in business-related services remains tense. The impact of U.S. trade policy is not yet captured by the latest economic indicators, and the risk of a marked slowdown of global growth, which would also affect Germany, has considerably increased.
• Following a positive start to the year 2025, production in the goods-producing sector fell 1.3% in February (adjusted for price, seasonal and calendar variations) compared to the preceding month. Industrial output shrank only slightly (-0.5%), whereas the declines in the construction and energy sectors were more pronounced (-3.2% and -3.3%). While the sentiment indicators for the industrial sector have improved, this development is very unlikely to continue in the face of U.S. tariff policy.
• Price-adjusted retail turnover (excluding motor vehicles) rose slightly by 0.3% in February (month-on-month). Year-on-year, the retail sector reported real sales growth of 4.4%. Total new car registrations declined in March by 2.2% (month-on-month) and 3.9% (year-on-year). Consumer sentiment is also likely to be adversely affected by recent geopolitical developments.
• In March, the inflation rate (+2.2%) continued to approach the mark of 2%. Food prices continued to rise, whereas energy prices fell more quickly than before. The core inflation rate declined slightly, probably as a result of lower price pressure in the field of services, which, however, continued to be above the average. Over the course of the year, it is likely that factors dampening inflation will continue to dominate.
• Given the persisting weakness in short-term economic performance, the spring recovery on the job market is exceptionally low this year. Adjusted for season, unemployment has risen by another 26,000 persons and gainful activity fell by 10,000 in February, which is also more than is typical. While actually realised short-time work was again higher than in the previous year (+240,000), notifications of short-time work have stabilised at a slightly lower level than before. As the leading indicators give rise to expectations of a further rise in unemployment and a continued fall in employment, the labour market is expected to develop slowly for the time being.
• According to official data, the number of corporate insolvencies saw a slow rise between December 2024 and January 2025 (+2.2%). For March, the Halle Institute for Economic Research reports 1,459 cases of insolvencies of partnerships and corporations, which is a slight increase of 1.6%. According to data from the Halle Institute for Economic Research, a total of 4,237 insolvencies were registered in Q1 of 2025, corresponding to an increase of 18.4% over Q1 of 2024.
   

• The economy remains weak in view of restrained domestic and foreign demand coupled with increased uncertainties about the trade and geopolitical outlook. Latest figures show a stabilisation in industry contrasting with a decline in services. Current leading indicators reveal mixed sentiment in the German economy, with the trend indicating a bottoming out. At the same time, the projects of the future governing coalition that are currently being discussed could trigger stabilising expectations and greater planning security for households and commerce.
• Output in the goods-producing sector made a positive start to 2025 with a 2.0% rise from December to January. Within this figure, industrial output grew appreciably, by 2.6%, whilst the development in the construction sector was weak, at +0.4%, and the energy sector saw a slight decline of -0.5%. There was a setback in the volume of new orders at the beginning of the year: they fell by 7.0% in January. In the goods-producing sector as a whole, no cyclical recovery can yet be seen, even if some previous production falls were offset at the beginning of the year. This is reflected in business sentiment: according to ifo Business Climate and S&P Global, it remains at a low level.
• Price-adjusted retail turnover (excluding motor vehicles) rose slightly by 0.3% in January (month-on-month). Year-on-year, the retail sector experienced real sales growth of 3.0% in January. Total new car registrations declined in February by -6.8% (month-on-month) and -6.4% (year-on-year). Worries about job security and persisting geopolitical uncertainties recently meant less planning security and inclination to purchase on the part of consumers.
• The inflation rate was unchanged in February, at +2.3%, close to the monetary policy target of 2%. Whilst the cost of foodstuffs rose appreciably more in year-on-year terms than in January, the core inflation rate softened, and energy prices fell somewhat more strongly. Not least due to administrative price rises at the beginning of the year, tangible falls in the inflation rate are not anticipated until later in the year.
• The development on the labour market remains weak at the beginning of the year. Whilst seasonally adjusted unemployment rose slightly further in February, employment again declined in January. The volume of realised short-time work in December was much higher than a year before, but the notifications of short-time work have stabilised at a rather lower level than in the autumn. In view of weakening demand for labour and a lack of economic stimuli, the spring recovery is likely to be rather restrained this year.
• According to official data, the number of corporate insolvencies remained virtually unchanged between November and December 2024 (+0.2%). For the whole of 2024, there was a rise of 22.4% compared with 2023. The bankruptcy indicator of the German Economic Institute (IWH) in Halle recorded 1,436 insolvencies in February, or 7.0% more than in January. At the same time, the IWH believes that it is feasible, going by leading indicators, that the phase of rising insolvency numbers may be over for the time being.
   

• At the end of 2024, German economic output was weaker than initially reported, with GDP declining by 0.2% compared to the previous quarter. Current leading indicators show a slight improvement, although the dichotomy between the positive trend in the services sector and the recessionary development in the manufacturing sector appears to be continuing. Against the backdrop of persistently weak domestic and foreign demand, increased domestic and geopolitical risks, particularly with regard to US trade policy, and the resulting dampened consumer and investment sentiment, a noticeable economic recovery is not yet evident at the beginning of the year.
• Incoming orders in the manufacturing sector increased noticeably in December by 6.9% compared to the previous month; adjusted for large orders, they rose by 2.2%. In the fourth quarter as a whole, incoming orders in the manufacturing sector remained unchanged. Production in the manufacturing sector fell by 2.4% in December at the end of 2024 compared to the previous month. This was mainly due to a decline in industrial production. The construction industry stagnated, while the energy sector expanded slightly. In the fourth quarter as a whole, production in the manufacturing sector continued to decline at -0.9%. Given the sentiment indicators from ifo and S&P Global, which still show a low level, there are no signs of a turnaround in the industrial economy at the beginning of the year.
• Real retail sales (excluding motor vehicles) fell by 1.6% in December compared to the previous month, but the fourth quarter saw an overall increase of 0.6%. New car registrations fell in January compared to both the previous month (-5.5%) and the same month last year (-2.8%). Concerns about job security and ongoing geopolitical uncertainty continue to hinder a noticeable recovery in the consumer climate.
• The significant increase in consumer prices at the end of 2024 did not continue in January. The inflation rate fell by 0.3 percentage points to +2.3% in January. This was mainly due to a significantly weaker increase in food prices (+0.8%) and the continued decline in energy prices (-1.6%). The core rate (excluding energy and food) also fell significantly by 0.4 percentage points to 2.9%. The lower price pressure on services played a role here.
• The labour market continues to develop relatively robustly, but is increasingly suffering from the weak economic development. Although the number of employed people rose slightly in December, registered unemployment and underemployment also increased in January. The number of people on short-time work was significantly higher in November than in the same month last year. The leading indicators do not suggest that there will be any noticeable recovery in the labour market at the beginning of 2025.
• The IWH insolvency trend shows 1,342 insolvencies for January, which is almost unchanged from the previous month, but remains at a comparatively high level. The number of employees affected by insolvency is at a significantly higher level compared to historical figures.
  
   

• According to the Federal Statistical Office, gross domestic product fell by 0.1 % in the fourth quarter, adjusted for price, seasonal and calendar effects . The preliminary annual GDP result for 2024 shows a price-adjusted decline of 0.2 percent. While the manufacturing sector continues to be characterized by a decline in production, the situation in consumer-related services is somewhat more favourable. A noticeable economic recovery in Germany is only likely to begin with clear prospects for the future economic, financial and geopolitical framework conditions.
• Production strengthened somewhat in November, but orders fell due to volatile large orders. Overall, there are no signs of a turnaround in the industrial economy. In the more meaningful three-month comparison, industry reduced its output by 1.3 % , although at the same time orders received in the manufacturing sector increased by 1.7 % . The sentiment indicators from ifo and S&P Global are still at a low level.
• The situation in the retail sector (excluding motor vehicles ) developed slightly weaker in November, with a price-adjusted decline in sales of 0.1 % . However, compared to the same month last year, retail sales rose by 3.0 % , and in the three-month comparison an increase of 2.3 % . New registrations of passenger cars overall fell significantly in December, both compared to the previous month (-6.2 % ) and the same month last year (-7.1 %) . In the three-month comparison, however, there was an increase of 10.1 % . In view of increasing concerns about job security and ongoing domestic and geopolitical uncertainties, a noticeable recovery in the consumer climate is still pending.
• The upturn in consumer prices observed in recent months continued at the end of the year. The inflation rate is expected to have risen significantly to +2.6 % in December , for a number of reasons: the year-on-year decline in energy prices was less pronounced, as expected, and the price increase in the services sector remains high. This is also reflected in the core rate (excluding energy and food), which also continued to rise.
• Despite ongoing economic stagnation, the labour market is developing relatively stably at the end of the year, but the outlook for the future remains cloudy. The number of employed people increased in November, but at the same time registered unemployment continued to rise moderately in December. The number of people on short-time work also increased again in December. The early indicators point to a further decline in demand for labour, so that a reversal of the weak development in the labour market is not expected at the beginning of the year either.
• According to final results in October, corporate insolvencies rose by 35.9 % compared to October 2023, with 2,012 cases. A total of 18,234 were registered from January to October, 23.6 % more than in the same period last year. The IWH insolvency trend in December was almost unchanged compared to November, but at the same time was 24.3 % higher than in the same month last year. The insolvency situation remains dynamic.
  
   

• According to the revised GDP figures from the Federal Statistical Office, the German economy almost stagnated in the third quarter. While losses were recorded in the manufacturing and construction sectors as well as in business-related service providers, there were increases in public service providers and in consumer-related service sectors (hotels and restaurants, retail). This suggests that private households are becoming less reluctant to buy, not least as a result of sharp increases in nominal and real wages. However, the renewed deterioration in recent sentiment indicators and the ongoing high level of geopolitical and domestic uncertainty do not yet indicate a sustainable economic recovery.
• Production and orders began the final quarter with declines. The industrial economy is still in a downturn. In the less volatile three-month comparison, however, the decline in production in the manufacturing sector was not as severe as before at -0.4 % , and incoming orders in the manufacturing sector even increased by 2.7 % . Nevertheless, the renewed deterioration in the sentiment indicators from ifo , S&P Global and ZEW suggests that a sustainable turnaround in the industry cannot be expected at present.
• The situation in retail (excluding motor vehicles ) has changed little recently. Price-adjusted sales in retail (excluding motor vehicles ) fell by 0.5 % in October compared to the previous month; compared to the same month last year, they were 2.2 % higher. Private new car registrations also barely changed in November after a strong increase in October (+0.3 % ). In view of increasing concerns about job security and ongoing geopolitical uncertainties, a sustainable recovery in the consumer climate is likely to be delayed for the time being.
• As expected, the inflation rate rose slightly to 2.2 % in November , but consumer prices fell by 0.2 % compared to the previous month . The fact that the annual rate increased in the last two months is mainly due to the elimination of the base effect for energy and package holidays. The inflation rate also averaged 2.2 % for the first eleven months of the year .
• Economic weakness continues to shape the development of the labor market. In October, the number of employed people fell again slightly after seasonal adjustment, and unemployment rose in November. At the same time, short-time work increased significantly in November. In view of the falling demand for labor and the announcements of job cuts in the manufacturing sector, the weak development of the labor market is expected to continue in the coming months.
• According to the IWH insolvency trend , the number of insolvencies fell slightly in November, but is still at a significantly higher level. In November, 1,345 insolvencies of partnerships and corporations were reported, a decrease of 12.1 % compared to the previous month , but still 37.7 % above the same month last year. The IWH also expects the number of insolvencies to remain high in the coming months , which are noticeably higher than the average values ​​for the pre-crisis years 2016 to 2019.

The German economy followed a slight upward trend towards the end of 2025. Based on an initial and very early estimate released by the Federal Statistical Office, real GDP recorded a quarter-on-quarter rise of 0.2 % in seasonally adjusted terms in the fourth quarter. Industry is likely to have picked up again. According to the data available so far, exports declined again, partly on account of continued weak exports to the United States. However, despite higher US tariffs and a further deterioration in Germany’s competitive position reported by the ifo Institute, the trend in foreign demand continued to point upwards. In addition, domestic demand showed a steep rise recently. This was probably  driven by orders for military equipment in particular. However, the still low capacity utilisation continues to weigh on business investment. By contrast, construction output is benefiting mainly from modernisation projects for public infrastructure and growth in the finishing trades. Furthermore, private consumption and the related services sectors are likely to have provided positive impetus. The steep rise in wages created scope for additional consumer spending. This was reflected in higher real retail sales and motor vehicle registrations. Nevertheless, firms’ expectations recently became somewhat more pessimistic again, suggesting that economic output is likely to grow only moderately in the first quarter of this year. The easing of fiscal policy is likely to provide stronger impetus over the remainder of the year, however.

Industrial output probably rose significantly in the fourth quarter. In November 2025, the latest date for which data are available, it rose again considerably on the month in seasonally adjusted terms. Averaged over October and November, it was significantly above its level in the previous quarter. Manufacturers of capital goods were the main contributors to the strong growth in output. Output rose across all sectors in quarter-on-quarter terms here. However, according to data from the German Association of the Automotive Industry, the number of passenger cars produced fell in December after seasonal adjustment and thus on a quarterly average as well. Price-adjusted industrial sales showed a considerably more subdued development than industrial output. Despite a strong increase in November, they were only slightly above the level of the previous quarter averaged across October and November. This is also likely to reflect the fact that sales lag production.

Demand for industrial products was recently driven by large domestic orders to a significant extent. In November, new orders in German industry were up steeply on the previous month in seasonally adjusted terms owing to an increase in large orders. Averaged over October and November, they were likewise significantly higher than their level in the previous quarter. The Federal Government’s efforts to increase defence spending are likely to have contributed to this, with domestic orders experiencing a particularly sharp rise. In addition, strong growth was largely driven by orders for the manufacture of basic metals and other transport equipment, which also includes military vehicles. Even excluding large orders, there was an increase in orders overall, although domestic orders were significantly weaker without the large orders. At the same time, the upward trend in foreign demand remained unchanged despite the dip in the third quarter. New orders from abroad declined slightly on the month in November. Averaged over October and November, however, they were distinctly higher than in the previous quarter. 

Economic output in Germany declined somewhat in the preceding summer half-year. In seasonally adjusted terms, real GDP fell by a cumulative 0.2 % in the second and third quarters, slightly more strongly than expected in the Bundesbank’s June 2025 Forecast for Germany. The German economy thus suffered a further setback. According to national accounts data, which were revised in the third quarter, it has clearly been in a recession since the end of 2022 but has recovered somewhat since mid-2024, however. As a result of US trade policy and the introduction of far-reaching US tariffs, exports to the United States dropped sharply in the third half of the year, but the overall decline in exports was significantly less than expected. Business investment was also somewhat more robust. Uncertainty stemming from US trade policy is likely to have had less of a dampening effect than feared. Nevertheless, industrial output fell markedly. Construction, in particular, was weaker than expected in the June forecast, as housing investment suffered a further sharp decline. Private consumption also fell short of the forecast, even though the labour market proved somewhat more stable. Gains among service providers almost offset a further reduction in jobs in the manufacturing industry. At the same time, there was a surprisingly sharp rise in actual wages. This is particularly true of some services sectors with comparatively robust economic and labour market conditions. This is likely to have contributed to the fact that HICP inflation rates were also well above the June forecast recently. Core inflation (excluding energy and food), in particular, surprised to the upside. 

The German economy is gradually returning to a recovery path. GDP is initially expected to rise only slightly in the 2025/26 winter half-year. Exports are therefore likely to pick up somewhat after the tariff-related burdens and industry is likely to stabilise. Some service providers will probably see further growth, too. There are also some initial signs of an increase in government orders. However, according to the available leading indicators, the expected fiscal easing is not set to already provide any significant boost to the economy as a whole in the short term (see the section “Details of the short-term GDP forecast”). The expansionary fiscal policy will only play a significant role later in the forecast horizon. Additional defence and infrastructure spending will strongly drive up government investment and additional defence spending will also be reflected in higher government consumption. The cumulative overall effect of this spending on annual GDP growth is estimated to be + 1.3 percentage points between 2025 and 2028. Fiscal policy will also support economic activity through further measures (see the section “Fiscal assumptions”). From the second quarter of 2026, GDP growth will accelerate markedly. Fiscal stimulus is a key prerequisite here but a revival in household demand is important, too. Exports will slowly return to an expansion path over the course of next year. Global trade and foreign demand will then see significant growth again (see the section “Assumptions regarding the international environment, exchange rates, commodity prices and interest rates”). Given the deterioration in its competitiveness, the German export industry will see only limited benefits from this. Private residential investment will also start to recover in 2026. Strongly rising wages and a gradual improvement in the labour market will underpin households’ real disposable income and thus moderate growth in their consumption. With increased capacity utilisation, businesses will also invest more again. However, this will not be noticeable until 2027. The pace of the annual average GDP expansion will then accelerate significantly. Momentum will decline towards the end of the forecast horizon, however, mainly as domestic household demand loses impetus. Higher interest rates will then curb investment and a sharp rise in social contribution rates will dampen disposable income and private consumption (see the section “Forecasts of expenditure components of GDP”).
 

The global economy remained robust in the third quarter of 2025. In the United States, GDP is likely to have grown markedly again despite the higher import tariffs. In China, by contrast, economic activity weakened somewhat. This was mainly due to weaker domestic demand, whilst exports remained fairly buoyant. In the euro area, economic activity grew slightly again. Overall, the global economy proved resilient to the burdens arising from trade disputes.

Global trade in goods also held up well overall in the summer months, despite the sharply risen US tariffs. Nevertheless, there were marked changes in the regional structure of global trade. US foreign trade, which accounted for around 14 % of global imports of goods in 2024, was impacted to a considerable degree by the restrictive trade policy. In particular, imports to the United States from China fell substantially in comparison with the start of the year. Outside of the United States, international trade in goods remained buoyant. It remains to be seen whether the burdens arising from trade policy disputes will have a greater impact on global trade over the remainder of the year. 

International trade policy continued to be characterised by considerable unease. The US administration pushed ahead with its trade policy agenda. Various sector-specific tariff rates were increased. At the same time, the US administration reached framework agreements for future trade relations with other, predominantly Asian countries. As in previous negotiations, the United States was able to gain concessions from its partners. There was a certain degree of de-escalation in the trade dispute between the United States and China. Both parties agreed on moderate reductions in tariffs as well as additional relief measures. Prior to this, both sides had exchanged significant threats. In particular, potential restrictions on the export of rare earths by China would have also entailed considerable risks for the European economy. However, even after the agreement between the United States and China, the risk of renewed escalation remains.

German economy unable to break free from economic weakness

Real gross domestic product (GDP) is likely to flatten at best in the third quarter of 2025. Industry is continuing to suffer due not only to structural problems, but also raised US tariffs. Output, real sales and real exports of goods saw a decline recently. The same is now also true for industrial new orders. Moreover, the still low level of capacity utilisation in industry and weak competitiveness probably continued to weigh on investment activity and thus on demand for capital goods. Standing somewhat in contrast to this, however, is the improvement in short-term production expectations and, above all, export expectations in September reported by the ifo Institute. A broad-based recovery is likewise still to materialise in the construction sector. Construction output rose slightly averaged across July and August. The increase was attributable solely to the finishing trades, though, whilst output in building construction and civil engineering was lower. The situation in civil engineering is still significantly better than in building construction. Private consumption is likely to have registered a slight increase at most. Activity in the services sector was likewise sluggish. Service providers’ output declined slightly in July and the business situation of consumer-related service providers deteriorated in the third quarter, according to surveys conducted by the ifo Institute. However, the S&P Global Purchasing Managers’ Index remained just above the expansion threshold in the services sector.

German economy likely to grow slightly in third quarter

The German economy is proving relatively robust in a difficult environment. Overall, from today’s perspective, real gross domestic product (GDP) could increase slightly in the third quarter of 2025. Investment conditions for firms remain unfavourable amid weak competitiveness and low capacity utilisation. However, there are no signs of any major setback for industry in the third quarter, despite additional burdens caused by the new US tariffs. On the contrary, it could even make a positive contribution to GDP growth. Industrial output rose steeply in July after seasonal adjustment. Price-adjusted sales increased significantly as well. As this noticeably good start to the quarter is based on notable developments in the case of the mechanical engineering sector and car manufacturers, it is unlikely to be sustained. However, combined with the leading indicators, it suggests that output will increase on a quarterly average. In fact, the underlying trend in new orders is still pointing upwards. In addition, following the preliminary trade agreement between the United States and the EU, survey indicators showed signs of a slowdown in August, but remained relatively robust overall. Exports to the United States are unlikely to weigh as heavily as in the second quarter. These had risen sharply in the first quarter ahead of the introduction of US tariffs in April and then plummeted. A recovery is yet to materialise in the construction sector. Financing conditions remained stable and demand is tending to increase. However, improved demand is not yet reflected in higher output. Private consumption is likely to rise slightly, if at all. The labour market is not currently providing any stronger stimulus in the form of rising employment, and the strong wage growth so far is likely to tail off. There are signs of a sideways movement in the services sector (excluding trade). According to the ifo Institute, businesses believe their current business situation to be worse averaged across July and August than in the previous quarter, but they were more optimistic looking ahead. 
 

Global economy robust so far despite trade disputes

The second quarter of 2025 once again saw the global economy in robust shape. US gross domestic product (GDP) rose significantly in the second quarter after having fallen slightly at the start of the year. The Chinese economy recorded similar growth to the first quarter despite the higher tariffs imposed by the United States. GDP in the euro area increased again slightly in the second quarter following the strong start to the year. The global economy appears so far to have been able to withstand the tougher and in part erratic US trade policy. This resilience was supported by the short-term front-loading and diversion of trade flows.  

Looking ahead, however, the United States’ erratic, protectionist trade policy is likely to place more of a strain on the global economy. In the year to date, the average tariff rate imposed by the United States on all its trading partners has climbed by more than 14 percentage points, reaching its highest level since the 1930s. A deal with the United States’ most important trading partner, China, is still pending, however. Given the in part erratic US tariff policy, the risk of an escalation of the trade disputes persists. This and the tariff hikes that have already been adopted are likely to place a mounting strain on global trade. Overall, the trade policy concessions made by some partner countries of the United States are too insignificant to offset the adverse effects of additional US tariffs on global trade. Global trade activity was already sharply lower in April and May, after US imports in particular had previously risen sharply in anticipation of tariff hikes. In addition to the unwinding of these front-loading effects, the initial dampening impact of the increased tariffs on demand from the United States became apparent. The medium-term outlook for global trade will depend on whether further countries give in to the temptations of protectionism and likewise seal themselves off more.
 

German economic output more or less unchanged in the second quarter of 2025

Lapsing anticipatory effects contributed to the fact that seasonally adjusted real gross domestic product (GDP) probably stagnated in the second quarter. In anticipation of higher tariffs, Germany’s industrial output and exports had risen significantly in the first quarter. In the second quarter, some US import tariffs on German goods and services were suspended, while future tariff levels remained unclear. However, it can be assumed that the high level of activity normalised somewhat compared with the previous quarter. Averaged across April and May, real exports of goods stagnated quarter on quarter. Meanwhile, industrial output also expanded with somewhat less momentum. Moreover, in the second quarter, the services sector likely expanded its activity slightly at best, partly because households’ propensity to save probably did not decline any further and private consumption therefore provided less impetus. The construction sector is expected to make a significantly negative contribution to growth.

The underlying basic trend remains weak overall. Domestic and foreign demand for German industrial products picked up somewhat but is still weak. Low capacity utilisation in industry continues to weigh on firms’ propensity to invest. Business sentiment did improve in June. In particular, business expectations as surveyed by the ifo Institute brightened. In addition, the S&P Global Purchasing Managers’ Index for June rose just above the expansion threshold again. However, this may partly reflect expectations about the impact of the more expansionary fiscal stance. Its impact on economic output is expected only with a delay, though. US tariff policy threatens to bring additional headwinds to German exporters in the short term. In particular, US President Trump recently announced that additional tariffs of 30 % (in place of the baseline 10 % tariff introduced in April) on products imported from the EU will enter into force from 1 August 2025 if no agreement is reached before that date. In the June Forecast for Germany, the Bundesbank had still assumed a tariff rate of 10 % for the baseline. If the newly announced tariff rate takes effect, it would thus represent a considerable downside risk to the economy. With regard to the adverse risk scenario also outlined in the June Forecast for Germany, however, two things should be noted. On the one hand, it only assumed an additional tariff rate of 20 % for EU exports. On the other hand, it assumed other factors that would act as a drag, such as reciprocal EU tariffs of the same amount, once again very high tariffs between the United States and  China, and persistently high uncertainty as well as strong financial market reactions. The extent to which these factors will become relevant is currently unclear.
 

The recovery of the German economy is being delayed by the turmoil caused by international trade policy. Only gradually will economic activity be boosted by additional fiscal measures.

The new US tariffs and the uncertainty surrounding US policy are set to weigh on economic growth both this year and the next. In connection with this, the rise in GDP will be weakened by the imposed tariffs themselves and the associated general uncertainty. By the end of 2027, macroeconomic growth is estimated to be around ¾ percentage point lower solely on account of these factors.

From next year onwards, the expansionary fiscal policy stance will contribute to the significant economic recovery that is set to begin then. The demand effects from increased defence and infrastructure spending are estimated to support the cumulative increase in GDP by ¾ percentage point over the forecast horizon. The general government deficit ratio will rise to just over 4 % by 2027, partly owing to other measures. In the wake of strong growth in spending by the social security fund, contribution rates will rise steeply. 

Overall, real GDP in 2025 is likely to tread water in calendar-adjusted terms, but will then see strong growth again, at 0.7 % in 2026 and 1.2 % in 2027. In view of this, the growth outlook has mainly been revised downwards for 2025 and upwards for 2027 relative to last December’s Forecast for Germany.

The inflation rate as measured by the HICP will fall to 2.2 % this year before temporarily dropping to 1.5 % in 2026 and rising again to 1.9 % in 2027. The temporarily lower inflation rate in the coming year will be driven by lower energy commodity prices and the appreciation of the euro against the US dollar as well as directly energy price-lowering fiscal measures. Core HICP inflation (excluding energy and food) will stabilise around 2 % from 2026 onwards.

The inflation outlook for 2025 and 2026 has thus been revised significantly downwards compared to the Forecast for Germany from last December.

The outlook around this baseline is shaped by major uncertainties surrounding trade disputes, geopolitical conflicts and the specifics of German fiscal policy. There are risks to economic growth and inflation in both directions.

The global economy was still in robust shape at the start of 2025. Anticipatory effects resulting from expectations of further US tariffs even appear to have stimulated global trade and industrial production temporarily. This is likely to be one reason why economic output in the euro area increased markedly in the last quarter. In China, the pace of growth remained solid at first. In the United States, while real gross domestic product (GDP) decreased slightly against a backdrop of a sharp upturn in imports, other indicators did not yet point to a significant deterioration in economic activity.

From the second quarter onwards, the US’s pivot towards protectionist trade policy is likely to weigh increasingly on the global economy. Uncertainty over trade policy had already risen significantly in the aftermath of the election of the new US President. At the start of 2025, the new US administration then began to impose the first additional tariffs on imports from various countries. Further tariff increases followed. Trading partners resorted to retaliatory measures in some cases. Some of the tariff increases were then withdrawn. In trade between the United States and China, reciprocal tariff rates temporarily shot up to prohibitive levels. Recently, the average effective tariff rate of the United States for all trading partners was more than 13 percentage points higher than at the start of the year, putting it at its highest level since the 1930s. Many trading partners of the United States are being threatened with further tariff hikes from July onwards in the event of negotiations to reshape bilateral trade relations failing. It is already apparent that the new tariffs and the ongoing trade policy uncertainty are proving an increasing drag on the global economy. According to business surveys, business expectations have deteriorated significantly over the last few months not only in the manufacturing sector but also in services. 

German economic activity slightly stabilised in the reporting period, but outlook significantly gloomier

Economic output in Germany is likely to have increased slightly in the first quarter of 2025, but could suffer a setback in the second quarter. In the first quarter of 2025, real gross domestic product (GDP) is likely to have risen slightly after seasonal adjustment, following a decline in the previous quarter. This is suggested by the recent increase in industrial and construction output. Service providers are also likely to have expanded their activity somewhat, possibly buoyed by slightly higher private consumption. Real sales in the retail trade, for instance, continued to rise in January and February. However, the underlying cyclical trend remains weak overall. While demand in the construction industry has already recovered from a very depressed level, domestic and foreign demand for German industrial products has remained sluggish. Low capacity utilisation in industry is weighing on firms’ propensity to invest. The labour market is weakening and dampening consumer sentiment. In March, there were positive signals from business sentiment. The ifo business climate index rose markedly and on a broad front. Business expectations, in particular, brightened. In addition, the S&P Global Purchasing Managers’ Index for March was above the expansion threshold in both the services and manufacturing sectors. However, the much more expansionary future fiscal policy stance, which is on the cards following the amendments to Germany’s Basic Law, is likely to have been a major factor in this. Yet a certain time lag is expected before fiscal policy has any major supporting effect on economic output. In the short term, meanwhile, there is a risk of additional headwind for the export industry as a result of US tariff policy. The recent developments and the resulting strong responses in the financial markets were not yet reflected in the March sentiment indicators. The S&P Global Purchasing Managers’ Index fell markedly in April. From today’s perspective, economic output is expected, overall, to decline again in the second quarter.

Muted but positive start for the Germany economy in the new quarter

The German economy is likely to pick up slightly in the first quarter of 2025. Both industry and construction increased output in January, with one-off effects likely to have played a significant part. The rise in industrial output followed a weak year-end. The timing of the December public holidays in conjunction with weak industrial activity probably played a role here. In the construction sector, the favourable weather conditions provided a slight boost in January. However, the basic tendency in industry in particular remains weak in the first quarter. For the time being, the slight recovery in foreign demand for German industrial products has not continued at the beginning of the year. This highlights the persistently difficult competitive position. In addition, investment is still currently facing headwinds. The high degree of uncertainty surrounding economic and political conditions is dampening the propensity to invest, and low industrial capacity utilisation is weighing on investment. Private consumption did not provide any stimulus to growth at the beginning of the year. Consumers were unsettled by the cooling labour market and concerns about job losses, amongst other things. They were reluctant to make use of the additional scope for spending on consumption that had been created last year by the sharp rise in wages. The services sector as a whole, however, is likely to make a slightly positive contribution to growth in the first quarter, even without impetus from private consumption. Overall, economic output is thus likely to increase slightly in the first quarter, although the underlying cyclical trend remains weak.

The future outlook for the German economy is particularly uncertain at present. Compared with expectations from the last Forecast for Germany, the restrictive and uncertain trade policy of the United States could dampen exports more strongly, especially if more extensive tariffs against the EU were to be implemented. At the same time, the considerably more expansionary stance of German fiscal policy, which was envisaged in the results of the preliminary coalition talks of the parties negotiating the formation of a new government, could give a stronger boost to economic output in the coming years.
 

The global economy expanded moderately again in the final quarter of 2024. This expansion varied across regions. Economic activity remained buoyant in the United States, and in China it strengthened somewhat due to government stimulus measures and strong exports. By contrast, economic output in the euro area rose only slightly. This was also due to the elimination of one-off effects that had supported growth in the third quarter, such as the Olympic Games in Paris. 

The regional dichotomy in industrial activity also continued in the fourth quarter. Globally, industrial output is likely to have expanded quite substantially in the final quarter of 2024. However, output growth continued to be driven primarily by emerging market economies. In the advanced economies, industrial activity remained weak. Exports of goods also only picked up in the group of emerging market economies. Expectations of higher US import tariffs probably contributed here. 

The tighter US trade policy stance could weigh heavily on world trade and global activity. Newly elected US President Trump intensified his tariff threats against Canada and Mexico, the United States’ main trading partners. US import tariffs on China have already been raised, although so far not nearly by as much as was promised before the presidential election. Recently, the US administration has also adopted additional tariffs on all imports of steel and aluminium and announced broad-based tariff increases against many of its trade partners. Actions of this kind could provoke retaliatory measures from affected countries. Should that occur, the United States has announced that it will respond with further tariff steps. This could lead to serious trade conflicts. Against this backdrop, trade policy uncertainty rose considerably worldwide. The heightened uncertainty alone could already be dampening global economic activity. 
 

The German economy remained listless in the fourth quarter of 2024.

Based on an initial and very early estimate released by the Federal Statistical Office, real GDP declined by 0.1% in seasonally adjusted terms. Industry is again likely to have remained particularly weak, being under high pressure to adapt to changing structural conditions. Foreign orders remained very sluggish despite some degree of recovery. The ifo Institute’s business climate index deteriorated again. The construction sector is unlikely to have provided much growth stimulus. A more favourable development in civil engineering is still being offset by the decline in building construction. By contrast, private consumption and the related services sectors are likely to have provided positive impetus. The steep rise in wages provided scope for additional consumer spending. However, consumers remained unsettled and this prevented a stronger recovery in consumption.  It is also unlikely that the German economy will manage to escape the prolonged period of stagnation in the first quarter of 2025. 

Economic output in Germany declined in 2024 as a whole. According to preliminary calculations by the Federal Statistical Office, real GDP fell by 0.2% on the previous year (and also by 0.2% after calendar adjustment). High financing costs, heightened economic policy uncertainty and the severe capacity underutilisation weighed on investment. The reduced competitiveness of German industry and high competitive pressure, especially from China, were reflected in dwindling exports. Households held back on spending despite sharply rising wages. As a result, their saving rate rose while private consumption increased only slightly.

At its meeting on 18 December 2025, the Governing Council decided to keep the three key ECB interest rates unchanged. Its updated assessment reconfirmed that inflation should stabilise at the 2% target in the medium term.

According to the December 2025 Eurosystem staff macroeconomic projections for the euro area, headline inflation is expected to average 2.1% in 2025, 1.9% in 2026, 1.8% in 2027 and 2.0% in 2028. For inflation excluding energy and food, staff project an average of 2.4% in 2025, 2.2% in 2026, 1.9% in 2027 and 2.0% in 2028. Inflation has been revised up for 2026, mainly because services inflation is now expected to decline more slowly. Economic growth is expected to be stronger than in the September 2025 ECB staff macroeconomic projections for the euro area, driven especially by domestic demand. Growth has been revised up to 1.4% in 2025, 1.2% in 2026 and 1.4% in 2027 and is expected to remain at 1.4% in 2028.

The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.

At its meeting on 30 October 2025, the Governing Council decided to keep the three key ECB interest rates unchanged. Inflation remains close to the 2% medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged. The economy has continued to grow despite the challenging global environment. The robust labour market, solid private sector balance sheets and the Governing Council’s past interest rate cuts remain important sources of resilience. However, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.

The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.

At its meeting on 11 September 2025, the Governing Council decided to keep the three key ECB interest rates unchanged. Inflation is currently at around the 2% medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged.

The September 2025 ECB staff macroeconomic projections for the euro area present a picture of inflation similar to that projected in June. They see headline inflation averaging 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027. For inflation excluding energy and food, they expect an average of 2.4% in 2025, 1.9% in 2026 and 1.8% in 2027. The economy is projected to grow by 1.2% in 2025, revised up from the 0.9% expected in June. The growth projection for 2026 is now slightly lower, at 1.0%, while the projection for 2027 is unchanged at 1.3%.

The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.

At its meeting on 24 July 2025, the Governing Council decided to keep the three key ECB interest rates unchanged. Inflation is currently at the 2% medium-term target. The incoming information is broadly in line with the Governing Council’s previous assessment of the inflation outlook. Domestic price pressures have continued to ease, with wages growing more slowly. Partly reflecting the Governing Council’s past interest rate cuts, the economy has so far proven resilient overall in a challenging global environment. At the same time, the environment remains exceptionally uncertain, especially because of trade disputes.

The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.

At its meeting on 5 June 2025, the Governing Council decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – was based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

Inflation is currently at around the Governing Council’s 2% medium-term target. In the baseline of the June 2025 Eurosystem staff macroeconomic projections for the euro area, headline inflation is set to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027. The downward revisions compared with the March 2025 ECB staff macroeconomic projections for the euro area, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March.

Staff see real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The unrevised growth projection for 2025 reflects a stronger than expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term. Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks.
 

At its meeting on 17 April 2025, the Governing Council decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – was based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The disinflation process is well on track. Inflation has continued to develop as staff expected, with both headline and core inflation declining in March. Services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis. Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions. Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.

The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.

At its meeting on 6 March 2025, the Governing Council decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The disinflation process is well on track. Inflation has continued to develop broadly as staff expected, and the March 2025 ECB staff macroeconomic projections for the euro area closely align with the previous inflation outlook. Staff now see headline inflation averaging 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027. The upward revision in headline inflation for 2025 reflects stronger energy price dynamics. For inflation excluding energy and food, staff project an average of 2.2% in 2025, 2.0% in 2026 and 1.9% in 2027.

Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis. Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.
 

At its meeting on 30 January 2025, the Governing Council decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The disinflation process is well on track. Inflation has continued to develop broadly in line with the December 2024 Eurosystem staff macroeconomic projections for the euro area and is set to return to the Governing Council’s 2% medium-term target in the course of 2025. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis. Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.

 

At its meeting on 12 December 2024, the Governing Council decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – was based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The disinflation process is well on track. According to the December 2024 Eurosystem staff macroeconomic projections for the euro area, headline inflation is expected to average 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.

Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis. Domestic inflation has edged down but remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay.