Financial News: German GDP Growth Rises On Exports, Consumption

German GDP Growth Rises On Exports, Consumption

(RTTNews) - The German economy expanded at a slightly faster pace in the first quarter, underpinned by consumption and exports, defying the adverse impact of the conflict in the Middle East.

Germany's gross domestic product grew 0.3 percent from a quarter ago, unrevised from the previous estimate and followed the fourth quarter's 0.2 percent expansion, detailed data from Destatis showed Friday.

"Following the slight increase recorded towards the end of 2025, the German economy also began 2026 in positive territory," Destatis President Ruth Brand said.

On a yearly basis, GDP registered a calendar-adjusted growth of 0.4 percent, which was slightly faster than the initial estimate of 0.3 percent.

At the same time, the statistical office confirmed that price-adjusted GDP logged a steady annual growth of 0.5 percent in the first quarter.

Exports increased 3.3 percent after falling 1.5 percent in the prior quarter, while imports rose only 0.1 percent. As a result, net trade contributed 1.3 percentage points to GDP growth.

Household spending remained unchanged in the first quarter, following a 0.6 percent rise a quarter ago. At the same time, the increase in government spending was 1.1 percent but slower than the 1.5 percent rise in the fourth quarter.

Gross capital formation posted a quarterly fall of 5.3 percent, reversing a 2.4 percent rise a quarter ago. Gross fixed capital formation in construction shrunk 2.5 percent and that in machinery and equipment decreased 1.2 percent.

Looking ahead, the growth composition combined with the obvious fallout from the war in the Middle East does not bode well for the near-term outlook for Germany, ING economist Carsten Brzeski said. The public sector is the only possible source of growth in the second quarter, he added.

A monthly survey conducted by the ifo Institute showed on Friday that German business sentiment improved in May, but the index remained at a low level as the energy shock triggered by the near closure of the Strait of Hormuz weigh on manufacturing.

The ifo business climate index rose to 84.9 in May from 84.5 in April. Companies were somewhat more satisfied with current business and their outlook for the coming months was less pessimistic.

Elsewhere, a consumer sentiment survey result from the market research group GfK showed that German consumer morale will improve in June driven by rising income expectations and the willingness to buy. The forward-looking consumer confidence index rose to -29.8 points in June from -33.1 points in May. 

The International Monetary Fund has forecast the German economy to grow only 0.8 percent this year and 1.2 percent in 2027.

In the Spring Forecast, released this week, the European Commission said after two years of recession and weak growth in 2025, the German economy is set to expand 0.6 percent this year and 0.9 percent next year, underpinned by public spending.

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