Germany’s Economy Grows 0.4% in Q1, Doubling Initial Estimates

Stronger-Than-Expected Exports and Manufacturing Drive Growth

Germany’s economy, the largest in Europe, expanded by 0.4% in the first quarter of 2025, according to revised official data released on Friday. This growth figure is double the initial estimate of 0.2% released just weeks ago, reflecting a more robust economic performance driven by a surge in exports and manufacturing activity.

Ruth Brandt, head of the Federal Statistical Office, attributed the upward revision to “the surprisingly good economic development seen in March.” The improved momentum in the final month of the quarter significantly boosted overall quarterly GDP growth, marking the strongest quarterly expansion since the third quarter of 2022, when growth was 0.6%.

Highlights:

• GDP growth revised upward to 0.4% in Q1 2025, double initial 0.2% estimate.

• Export and manufacturing sectors showed stronger-than-expected performance.

• March’s economic activity provided the main boost to quarterly growth.

• Most recent comparable growth was 0.6% in Q3 2022.

Context of Germany’s Recent Economic Struggles

Germany’s economy has faced persistent challenges in generating consistent growth over recent years. The country experienced economic contractions in both 2023 and 2024, including a 0.2% GDP decline in Q4 2024. This latest positive revision offers some respite from the slow recovery trend.

Economic advisers in the German government released their first forecast under Chancellor Friedrich Merz’s administration, predicting GDP stagnation for 2025 with a modest 1% growth expected in 2026. They cited ongoing global headwinds, including U.S. tariffs and trade tensions initiated under President Donald Trump, which continue to pose risks for Germany’s export-reliant economy.

Highlights:

• Germany faced GDP contractions in 2023 and 2024, with a -0.2% decline in Q4 2024.

• Government panel predicts no GDP growth in 2025; 1% growth forecast for 2026.

• Trade tensions and tariffs from the U.S. remain key economic headwinds.

• Infrastructure investment package offers hope for economic improvement next year.

Short-Term Surge Fueled by Tariff Anticipation

Carsten Brzeski, global chief macroeconomist at ING Bank, described the first-quarter growth rebound as a “positive one-off” event largely driven by firms accelerating production and exports to preempt potential tariff impacts from the U.S.

Brzeski noted that the anticipation of U.S. tariffs and the so-called “Liberation Day” tariff imposition led to a spike in German industrial output and exports in March, contributing heavily to the quarter’s upward revision.

Highlights:

• First-quarter growth seen as a “positive one-off” fueled by tariff anticipation.

• German industrial production and exports surged in March ahead of tariffs.

• Businesses acted to mitigate potential negative impacts from U.S. trade measures.

• Export sector remains highly sensitive to global trade policy developments.