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Investing.com -- Germany’s economic downturn deepened in the second quarter, with output contracting more than initially estimated, the statistics office said on Friday.
The eurozone’s largest economy shrank by 0.3% quarter-on-quarter in the second quarter, compared with a prior estimate of a 0.1% decline, following a 0.3% expansion in the first quarter.
On an annual basis, GDP grew by just 0.2%, after seasonal and calendar adjustments.
Weakness in investment, construction, and net exports weighed heavily on activity, while private and public consumption, along with inventories, provided some support.
The statistics office also sharply revised down GDP figures for 2023 and 2024. As a result, Germany’s economic output remains slightly below its 2019 level, underscoring a prolonged period of stagnation.
According to ING analysts, the full reversal of earlier U.S. front-loading effects has pushed the German economy back into recessionary territory, making a substantial recovery before 2026 increasingly unlikely.
Looking ahead, Germany’s outlook will hinge on trade dynamics, exchange rates, and fiscal policy. With 10% of German exports destined for the U.S., the newly imposed 15% tariffs on most European goods are expected to remain a drag on growth.
Meanwhile, a stronger euro against the U.S. dollar and other currencies further complicates recovery prospects for the export-driven economy, ING added.
At the same time, political debate over potential austerity measures risks diluting the impact of planned fiscal stimulus for infrastructure and defense. A drawn-out fiscal policy debate could prompt households and companies to delay spending and investment decisions, analysts said.