German economy surprises with stronger-than-expected growth
Germany's gross domestic product increased by 0.4% in the first quarter of 2025 compared to the previous quarter, according to the Federal Statistical Office in Wiesbaden. This result is 0.2 percentage points better than the preliminary estimates from the end of April.
"The reason for the slightly higher growth compared to the initial estimates was surprisingly strong economic performance in March," explained Ruth Brand, president of the Federal Statistical Office. "Above all, production in the manufacturing sector and exports developed better than initially assumed," added Brand. Such strong GDP growth was last recorded in the third quarter of 2022, when it amounted to 0.6%.
Foreign trade and private consumption drive growth
Foreign trade significantly increased in the first quarter of 2025. Exports of goods and services rose by 3.2% compared to the previous quarter. Notably, there was increased sales of pharmaceutical products and cars and car parts, key export goods to the American market. This was likely driven by anticipatory effects related to the escalating trade conflict with the USA. Imports also rose, but to a lesser extent—by 1.1%.
Household consumer spending rose by 0.5% compared to the fourth quarter of 2024, marking a clear acceleration compared to previous quarters. However, public consumption expenditure fell by 0.3%, likely due to temporary management of the federal budget and some states, which particularly restricted material expenditures. Overall, consumption increased by 0.2% quarter-on-quarter.
Investments also increased compared to the end of 2024. Both spending on buildings and structures (+0.5%) and equipment (+0.7%) were higher than in the previous quarter, marking the second consecutive increase in both areas. Overall, gross investments in fixed assets increased by 0.9%.
Diversified situation across various economic sectors
Gross value added in the first quarter of 2025 was 0.6% higher than in the fourth quarter of 2024, following four consecutive declines. Both the construction sector (+0.9%) and manufacturing (+1.0%) increased their production after previous declines. In the industrial sector, the chemical, machinery, and automotive industries performed particularly well, while metal products production fell.
The situation in the service sector was mixed. The information and communication industries (+1.7%) and trade, transport, and gastronomy (+1.1%) significantly increased their gross value added. Business services maintained the level from the previous quarter (0.0%), while declines were recorded in financial and insurance services (-0.8%), other services (-0.3%), and the public services, education, and health sector (-0.2%).
Compared to the first quarter of 2024, gross value added fell by 0.7%. The most significant declines were recorded in construction (-3.5%) and manufacturing (-1.6%), while the service sector maintained the level from the previous year (0.0%).
Germany's economy in the first quarter of 2025 was driven by around 45.8 million working people, which means a decrease of 60,000 people (0.1%) compared to the same period of the previous year. The average number of hours worked per employed person increased by 0.4% compared to the first quarter of 2024, and the total number of hours worked increased by 0.2%.
In an international comparison, Germany performed slightly better than the EU average. In the European Union, GDP rose by 0.3% quarter-on-quarter, while in Germany, it increased by 0.4%. Among large EU economies, Spain achieved the best result (+0.6%), with growth also recorded in Italy (+0.3%) and France (+0.1%). In the United States, however, GDP fell by 0.1% compared to the fourth quarter of 2024.
