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In
a preliminary report at the end of July, the Federal Statistical
Office said gross domestic product contracted by 0.1% in
April-June compared with the first quarter for Europe’s biggest
economy. That contributed to a lackluster showing for the
20-nation eurozone.
Full data showed output in manufacturing and the construction
industry was worse than expected in June and household spending
for the quarter also was revised downward, the office said
Friday. The decline followed growth of 0.3% in the first
quarter.
The German economy has shrunk for the past two years. Chancellor
Friedrich Merz’s administration has made revitalizing it a top
priority since taking office May 6.
It has launched a program to encourage investment and set up a
500 billion-euro ($582 billion) fund to pour money into
Germany’s creaking infrastructure over the next 12 years. It is
promising to cut red tape and speed up the country’s lagging
digitization.
A group of dozens of companies last month pledged to invest at
least 631 billion euros ($731.7 billion) in Germany over the
next three years, a figure that included some previously planned
investments but was designed to send a signal of confidence in
the economy.
ING economist Carsten Brzeski said “after the surge in economic
activity resulting from the U.S. front-loading of German exports
in the first quarter, the economy experienced a reversal of the
front-loading effect, and the first full-blown impact of U.S.
tariffs (implemented in the second quarter) took effect.”
It could “take until next year before a more substantial
recovery starts to unfold,” he said.
A European Union-U.S. trade deal was reached last month but
remains a work in progress.
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