Trump's tariffs take their toll: Germany contracts more than expected
GDP recorded a 0.3% decline in the second quarter, above the 0.1% forecast.
BarcelonaThe Trump administration's tariffs are taking their toll on what was once Europe's main economic engine. Germany's gross domestic product (GDP) fell by 0.3% between April and June, below the 0.3% expansion recorded in the first quarter of the current year, according to data from Destatis, the federal statistics office. This trend is two-tenths of a percentage point below the recent forecast, which estimated a decline of 0.1%.
"Output in manufacturing, and particularly in the construction sector, was worse than expected. In addition, household final consumption expenditure has been revised downwards due to new information on the services sector. Overall, the economic indicators released between the first GDP release and the latest results caused...
Household final consumption grew by only 0.1%, less than expected in the first GDP release, while government consumption increased by 0.8%. Investment, meanwhile, fell by 1.4%, following a slight increase in the January-March period.
Construction, which had started the year well due to favorable weather conditions, experienced a 3.7% drop, much worse than expected. And industry fell 0.3%, with negative developments affecting almost all branches, with the exception of the manufacture of motor vehicles, trailers and semi-trailers, and other transport equipment.
ING analysts believe that "a substantial recovery appears increasingly unlikely before 2026," after the latest data showed that "the size of the German economy is currently slightly below the 2019 level, probably the best and most painful illustration."
"The recent wave of optimism that swept through the German economy in the first few months of the year is not yet reflected in the data. In fact, following the rebound in economic activity stemming from the anticipated concentration of German exports by the US in the first quarter, the economy experienced a reversal of the anticipated concentration effect." Looking ahead, they estimate that the trajectory of the German economy and industry "will be particularly affected by trade, the exchange rate, and fiscal stimulus."