QUARTERLY REPORT GERMANY
First-quarter GDP growth exceeds expectations
Economic output also rose slightly over the six months of autumn 2024 and winter 2025
▪ The German economy picked up speed tangibly in the first quarter of the year, boosted by one-time effects. The outlook for the year overall remains subdued.
▪ Private consumption rose slightly at the start of the year. Consumers are no longer quite as reticent, and the savings rate nudged down.
▪ Manufacturing appears to be bottoming out. Gross value added and manufacturing output were both up on the previous quarter in the first quarter of the year.
German economy
Rising economic output exceeds expectations in first quarter
Germany’s gross domestic product (GDP) was 0.4 percent higher in the first quarter 2025 than in the fourth quarter 2024 following price, seasonal and calendar adjustment, according to figures from the German Federal Statistical Office. GDP was thus 0.2 percentage points higher than the first published estimate from 30 April 2025. In contrast to one year ago, when the fourth quarter results required downward adjustment as well, the previous quarterly growth did not require adjustment. Economic output in the six months of autumn and winter 2024 and 2025 was therefore 0.1 percent higher than over the six months of spring and summer 2024. Year on year, economic output in the first quarter 2025 was down by 0.2 percent in real terms (zero percent following calendar adjustment).
In the first quarter 2025, Germany’s economic output was generated by a workforce of 45.8 employees. That corresponds to 60,000 or 0.1 percent less than one year ago. The total number of hours worked by all employees, on the other hand, rose by 0.2 percent according to preliminary estimates by the Institute for Employment Research, the IAB.
Growth in real GDP in percent
Source: Federal Statistical Office
On the income side of GDP, gross value added overall in the first quarter 2025 was 0.7 percent lower in real terms than in the previous quarter. A major downward factor here was the hefty 3.5 percent slide in gross added value within the construction industry year on year Gross value added in the manufacturing sector was only half as pronounced, at minus 1.6 percent, but pulled down the overall result more on account of its size. The service sector trod water, nudging activity up by a minute 0.1 percent. The strongest performers within the service sector were public service providers, education and healthcare which increased gross value added by 1.6 percent. Information and
communication services (up 0.7 percent) and other service providers (up 0.1 percent) both only recorded minimal rises in activity. Financial service providers (down 3.8 percent) and corporate service providers (down one percent) both recorded downward gross value added for the third consecutive time. Property service providers saw gross value added drop 0.6 percent, while the heavyweight sector of retail, transport and hospitality stagnated.
On the expenditure side of GDP, private consumption increased 0.5 percent year on year following price adjustment. That was also 0.6 percent more than before the outbreak of the pandemic following seasonal and calendar adjustment. In the first quarter 2025, consumers increased their spending particularly on healthcare (up four percent), information and communication (up three percent), housing, water, electricity and energy (up two percent), and transport (up 1.3 percent). At the same time, consumers spent less on clothing and shoes (down 3.3 percent), food, tobacco and drinks (down 2.9 percent), hotel and restaurant services (down 1.4 percent) and leisure, entertainment and culture (down 0.6 percent). State consumption expenditure rose 1.5 percent in the first quarter 2025 and was as much as 12.1 percent higher than in the fourth quarter 2019 following seasonal and calendar adjustment.
The downward trend in gross fixed capital formation, which has lasted for more than two years now, slowed down markedly in the first quarter 2025, with a drop of only one percent year on year in real terms. While investment in plant and equipment continued downwards, sliding another 3.8 percent, investment in other assets (patents, licences) was a clear 3.5 percent higher year on year. Construction investment seems to be bottoming out following a lull of more than three years. Although investment in construction in the first quarter was one percent down year on year, it was upward quarter on quarter for the second successive time. Investment in residential housing dropped by another 2.6 percent year on year, but investment in non-residential construction rose 1.6 percent year on year, its third consecutive rise.
Exports of goods and services dropped by 1.1 percent in real terms in the first quarter 2025. While the export of services rose by 0.2 percent year on year, goods exports were 1.4 percent lower year on year. Going the other way, imports expanded 2.5 percent in the first quarter of the year. For the first time in three years, the import of goods outperformed the import of services. With imports much stronger than exports, net exports pulled GDP growth down by 1.4 percentage points.
Foreign trade by country
In the first quarter 2025, exports of goods were 2.3 billion euros or 0.6 percent higher than in the same period last year according to the foreign trade statistics of the Federal Statistical Office. In absolute terms, exports rose particularly to Germany’s neighbouring countries Switzerland (up 1 53 billion euros or 8.8 percent) and Poland (up 866 million euros or 3.7 percent). Outside of Europe, trade boomed especially with the United States (up 1 09 billion euros or 2 7 percent), Japan (up 864 million euros or 16.7 percent) and India (up 612 million or 17.2 percent). Going the other way, exports to China decreased substantially (down 3.49 billion euros or 14.5 percent). Exports to France (down 1.54 billion euros or five percent) and Hungary (down 797 million euros or 9.3 percent) also dropped markedly Exports to Russia contracted a further 63.3 million euros or 3.3 percent, down to 1.83 billion euros at the start of the year. Compared to the first quarter 2022, exports were down by two thirds. The export of goods to Ukraine increased by 645 million or 40.6 percent in the first quarter of the year. Trade with the United Kingdom was down at the start of the year, with exports to the country dropping by 434 million euros or 2.1 percent, down to 20.1 billion euros.
German exports and imports in Q1 2025 in selected countries
Year-on-year
Sources: Federal Statistical Office, own calculations
Goods imported to Germany in the first quarter 2025 overall were 15.5 billion euros or 4.8 percent more than in the same period last year. The strongest increase in nominal terms was in imports from China (up 4.48 billion euros or 12.4 percent). Imports were up by a good one fifth from Vietnam and India. Imports from the United Kingdom were up by a good one sixth or 1.51 billion euros. Imports rose by more than one billion euros from EU partner countries Italy (up 7.1 percent) and Poland (up six percent) and from Germany’s southern neighbour Switzerland (up 8.6 percent). Imports also increased slightly from gas supplying countries Norway (up 897 million or 13 percent) and the Netherlands (up 596 million euros or 2.5 percent). Imports from Russia decreased by 230 million
to around two thirds of the level last year. Compared to three years ago, imports from Russia were
down by as much as 97.5 percent. Imports from the United States remained almost unchanged with a minimal plus of 0.3 percent. Imports were down from EU partner countries France (down 847 million euros or 4.9 percent), Romania (down 600 million euros or 11.4 percent) and Ireland (down 565 million euros or nine percent.
Little movement on labour market
The spring pick-up on the labour market was extremely weak this year. According to preliminary data from the Federal Statistical Office, the number of people in employment within the country increased by 3,000 in April 2025 after seasonal adjustment, following an increase of 5,000 in March and 9,000 in February. Compared to April 2024, the number of people in employment was down by as much as 61,000 or 0.1 percent to 45.96 million. Compared to the peak employment levels of November 2023, 360,000 fewer people were in employment
The number of people in employment subject to social security contributions also remained relatively unchanged according to the latest figures. According to Federal Employment Agency projections, a total of 34.98 million people were in employment subject to social security contributions in March 2025 (latest figure available). After seasonal adjustment, that was 1,000 more people than in the previous month but 78,000 or 0.2 percent less than one year ago. For some time now, the growth in employment has been constituted mainly by part-time work. In March 2025, the number of people in part-time employment subject to social security contributions was 217,000 or 2.1 percent higher than one year ago, totalling 10.77 million. In the same month, the number of people in full-time employment subject to social security contributions decreased by 139,000 or 0.6 percent, down to 24.12 million.
Difference in the number of workers making social security contributions from the same month last year (right axis)
*seasonally adjusted in million
Source: Federal Employment Agency
Among other forms of employment, the number of self-employed people including contributing family members dropped by 11,000 in the first quarter 2025 quarter on quarter. Year on year, the number of self-employed people was 89,000 or 2.3 percent lower, down to 3.85 million. The number of people
exclusively in marginal employment dropped by 4,000 in March, according to preliminary Federal Employment Agency projections, following a rise of 2,000 in February. At 4.11 million, this group of workers was 56,000 or 1.3 percent larger than one year ago. The number of unemployed people in May was 196,000 or 7.2 percent higher than one year ago, rising to 2.92 million (year on year). Seasonally adjusted, the number of unemployed people in May was 34,000 higher than in April and, in April, 6,000 higher than in March. The unemployment rate in May 2025 was 6.2 percent as calculated by the Federal Employment Agency or 3.8 percent according to the ILO definition.
Industry receives more orders at start of year
After a sluggish start to the year, new orders improved across the board in March 2025 for the first time since July 2024. Looking more closely, incoming orders in the manufacturing sector increased by 3.6 percent on the previous month following seasonal and calendar adjustment, after stagnating in February. Excluding large orders, incoming orders in March were still up by 3.2 percent following seasonal and calendar adjustment. Year on year (compared to March 2024), demand was up on a similar scale, higher by 3.8 percent.
The March figures rounded off the first quarter 2025, with the poor performance in January bringing the quarterly results down. Compared to the fourth quarter 2024, incoming orders were down by 2.3 percent. Year on year, (compared to first quarter 2024), incoming orders were, in contrast, up by 1.3 percent. Looking at the origin of orders in the first quarter 2025, orders from at home were 3.3 percent lower than in the previous quarter. Compared to the same quarter last year, domestic orders were up by a lean 1.1 percent. Foreign orders were 1.8 percent down on the previous quarter. Compared to the first quarter 2024, orders from abroad were up by 1.4 percent. While demand from the euro area was 0.4 percent higher than in the previous quarter and 1.3 percent higher year on year, orders from third countries were down by 3.1 percent quarter on quarter, but 1.4 percent higher year on year.
Among the main groups of industrial goods, producers of intermediates received 0.7 percent more orders in the first quarter 2025 than in the previous quarter after calendar and seasonal adjustment. Year on year, orders were up by a minimal 0.3 percent. Domestic orders were down by 1.3 percent year on year, while orders from abroad increased by 1.7 percent.
The demand for capital goods dropped 4.9 percent in the first quarter 2025 quarter on quarter. Year on year, orders were nonetheless up by 1.7 percent. Orders from at home grew by 3.4 percent year on year, outperforming orders from abroad for the third consecutive quarter, which only increased by 0.7 percent.
Among consumer goods producers, orders increased by 2.3 percent in the first quarter 2025 compared to the previous quarter and following seasonal and calendar adjustment. Orders were also 2.6 percent higher than one year ago. Domestic demand here was down by a negligible 0.1 percent year on year while foreign orders rose a robust 4.2 percent.
The figures from incoming orders appear to indicate a bottoming out towards the end of the first quarter 2025 followed by a slow uptrend. Many industries recorded rising incoming orders. The producers of electrical equipment, pharmaceuticals and other transport equipment all registered double-digit growth in March. Sentiment indicators such as the purchasing managers’ index and
the ifo business climate index also pointed to recovery in February and March. The brightening sentiment could cloud over again very quickly though. The present situation is slightly reminiscent of the start of 2020, when industry started out the year with a good performance before the Covid pandemic brought the uptrend to an abrupt stop. This year has been plagued by a tariff virus that has escaped from a United States laboratory and that could likewise cause considerable damage to the global economy. The most recent sentiment indicators from April indicate that things could also take a fast turn for the worse again.
New orders, manufacturing
Change over previous year, two-month-average, in percent (right axis)
Volume index in manufacturing, two-month-average, seasonally adjusted (left axis)
Change over previous quarter (q-o-q), in percent
Source: Federal Statistical Office
Order books in industry start to fill up again
According to ifo Institute figures, the reach of orders in hand in the manufacturing sector was at 3.6 production months at the start of the second quarter 2025, unchanged to the previous quarter but 0.3 production months down year on year. Among the main industrial sectors, the reach of orders in hand among producers of intermediates stagnated compared to the first quarter but was down quarter on quarter for the ninth consecutive quarter. Among capital goods producers, the order backlog rose 0.3 up to 5.2 production months. The reach of orders in hand was also higher year on year for the second quarter in a row. Among consumer goods producers, the backlog of orders inched up to 1.9 production months but was down year on year, as in the first quarter
The latest figures from the Federal Statistical Office show a slight increase in momentum. The order backlog in the manufacturing sector in real terms in March 2025 was 1.1 percent larger than in February following seasonal and calendar adjustment, its second consecutive rise. The order backlog was also again higher year on year. Unfinished orders increased both from at home, up 1.2 percent compared to the previous month, and from abroad on a similar scale of 1.1 percent. The results of the main groups of industrial goods showed a similar pattern to the ifo sentiment
index. While the order books of producers of capital goods and intermediates were slightly fuller, the order backlogs of consumer goods producers diminished
Industrial production increases solidly at start of year
According to preliminary figures from the Federal Statistical Office, industrial production (excluding energy and construction) was up by 3.5 percent in March 2025 compared to the previous month and following seasonal and calendar adjustment. This was also the steepest rise since the 4.3 percent rise recorded in October 2021. Industrial activity also increased year on year (up 0.3 percent). While production in the energy industry was 1.8 percent down on the previous month, the construction industry stepped up its activity by 2.1 percent. Overall production was three percent up on February 2025. Compared to March 2024, production was down by a lean 0.2 percent.
Output in the goods-producing industry
Sources: Federal Statistical Office, own calculations year on year change in percent 2024 2025 Q3 Q4 Q1 Jan
The preliminary March figures completed the results for the first quarter 2025. Compared to the fourth quarter 2024, industrial production was up by 1.8 percent following seasonal and calendar adjustment in the first quarter 2025 following downward production of a good one percent in each of the previous three quarters. Year on year, production was nonetheless down by 1.9 percent. Among the energy-intensive industries, output increased by a slightly lower 1.1 percent quarter on quarter. Compared to the first quarter 2024, activity here was down by 2.2 percent, a slightly more pronounced decrease than recorded by the industrial sector overall. Energy production was 0.9 percent higher than in the previous quarter following seasonal and calendar adjustment. Compared to the previous year, production was down by a lean 0.9 percent. In the construction industry, production was 0.6 percent up on the fourth quarter 2024 but 1.9 percent down year on year. Across the whole production sector, output in the first quarter 2025 was 1.5 percent higher than in the previous quarter and 1.9 percent lower year on year.
For the first time in three years, production was up across all main industrial groups. The producers of intermediates produced 1.1 percent more than in the previous quarter following seasonal and calendar adjustment, but a substantial 3.1 percent less than one year ago. Capital goods producers increased their output by 1.4 percent compared to the previous quarter but were still 1.8 percent down year on year. Producers of consumer goods recorded the strongest increase in output, producing 3.9 percent more. Compared to the previous year, production here was also up by 0.4 percent.
Production, manufacturing
Change over previous year, two-month-comparison, in percent (right axis)
Volume index in manufacturing, two month average, seasonally adjusted (left axis)
Change over previous year (q-o-q), in percent
Source: Federal Statistical Office
At first glance, the downtrend in manufacturing output that has lasted for a good two years now appears to have come to an end. However, the solid increases in industrial production seen recently could also just reflect purchases that have been pulled forward in anticipation of the tariffs announced by the US administration. Furthermore, the upward movement is on a very low level indeed. In late 2019, production was more than nine percent higher than at last count. The construction industry may have bottomed out at the turn of the year with performance in the fourth quarter 2024 already slightly better than in the previous quarter. Building permits have also bottomed out according to the latest figures. Energy production rose somewhat in the last two quarters but was still 19 percent lower than before the outbreak of the pandemic.
Capacity utilisation increases narrowly in first quarter
The thin increase in production has also affected the capacity utilisation rates of production facilities. In the manufacturing sector, capacity utilisation at the start of the second quarter 2025 was 0.3 percentage points higher than in the previous quarter, following a marginal increase already in the first quarter. Standing at 77 percent, capacities here were three percentage points less utilised than one year ago and 6.5 percentage points less than on average over the last ten years. The capacity utilisation rate in manufacturing excluding food climbed by 0.4 percentage points, following an
increase of 0.1 percentage points the previous quarter. At 76.9 percent, capacity utilisation was 6.7 percentage points lower than on average over the last ten years.
Among the individual industries, the chemical industry increased its capacity utilisation by 2.7 percentage points compared to the previous quarter. In contrast to all other industries, capacity utilisation in chemicals was also positive year on year. Among producers of electrical equipment, capacity utilisation rose 5.3 percentage points. The furniture industry recorded an increase in capacity utilisation of 6.5 percentage points following a steep drop at the start of the year. Textiles, pharmaceuticals and machinery manufacturing all only increased their capacity utilisation rate marginally The producers of data processing equipment and optical products recorded the steepest slide in the utilisation of their production capacities of minus 1.5 percentage points, bringing capacity utilisation here down to 9.9 percentage points lower than the long-term average. Capacity utilisation in vehicle production and among producers of metal products dropped by 1.1 percentage points in both cases. In the food, beverages and tobacco industry, capacity utilisation nudged down a slim 0.3 percentage points.
Manufacturing revenue rises slightly at start of year
In the first quarter 2025, manufacturing revenue following price, seasonal and calendar adjustment was a narrow 0.7 percent higher than in the fourth quarter 2024. This was the second quarterly increase in a row. Year on year, revenue was 1.6 percent down. Looking at the origin of revenue, revenue from at home decreased by 2.6 percent compared to the same period last year. Revenue from abroad decreased by a less pronounced 0.7 percent. Revenue generated in the euro area dropped 1.3 percent, contracting much more than revenue generated by trade with third countries (down 0.2 percent).
Manufacturing revenue* in Q1 2025
Other transport equipment production
*Change in percent, year on year
Source: Federal Statistical Office
In nominal terms, manufacturing revenue was down on the first quarter 2024 by a slight 0.2 percent. While energy-intensive companies recorded a drop in revenue of 2.1 percent, revenue of the other industries increased by 0.4 percent overall. The consumer-related industries food, beverages and
tobacco and pharmaceuticals saw revenue increase by 2.3 and 8.1 percent respectively. Revenue in textiles fell 1.9 percent. Alongside other transport equipment (up 9.8 percent), metal producers and metal processors (up 1.5 percent) and chemicals (up 0.1 percent) all managed to increase revenue. The heavyweight industries electro (down 0.4 percent) and vehicle production (down 0.7 percent) and machinery manufacturing (down 0.8 percent) saw revenue slip slightly. Drops were somewhat more pronounced in the paper industry and in building materials (down 1.4 percent and 4.3 percent respectively).
Business climate: sentiment among companies slowly improving
Ifo Business-Cycle Clock
manufacturing*
*Balances, seasonally adjusted
Source: ifo Institut
The ifo business climate index for Germany rose for the fifth consecutive time in May 2025 despite the high degree of uncertainty regarding trade policy. The surveyed companies rated their current situation as slightly deteriorated compared to April but saw a clear improvement in their prospects for the next six months. Among the individual sectors, service providers were unsatisfied with their current business but much more optimistic about their prospects, enough to turn the overall result into a positive. Sentiment among transport and logistics providers recovered from the slump caused by the US tariff announcements In wholesale and retail, the index increased tangibly following a decrease in April. Business prospects brightened particularly among wholesalers and retailers, and they were also more satisfied with current business. In mainstream construction, the business climate index climbed up for the fourth consecutive month. Alongside a more positive rating of the current situation, construction companies were also markedly more optimistic about the future. Sentiment in the manufacturing sector also brightened up considerably Manufacturers were more positive about their
prospects, especially, but were also slightly more satisfied with their current situation. Despite the recent rise in sentiment, the ifo economic barometer remains in the recession quadrant. Sentiment among German exporters also brightened markedly. Export prospects climbed three index points in May, the steepest rise here since April 2022. Export prospects increased substantially in machinery manufacturing and in the automotive and electro industries but deteriorated in chemicals.
Outlook
The German economy started out the current year with a growth rate of 0.4 percentage points, thus continuing the meandering path around zero growth it has followed since 2022. An optimistic view of the current situation would be that the first quarter this year was the best start to the year that the German economy has seen in the last six years. Year on year, GDP was not down for the first time in six quarters, at least not following calendar adjustment, which could indicate that the economy will gradually turn up again in the course of the year. Growth in the first quarter was not driven purely by the service sector, as has been the case so often in the recent past. Activity in the construction industry and in manufacturing also picked up very slightly for the first time in around one year. Sentiment indicators such as the purchasing managers’ index and the ifo economic barometer were upwards at last count. However, US tariff policy is a sword of Damocles hanging over the whole economy and could easily bring the upward trend to an abrupt halt.
Private consumption surpassed expectations at the start of the year. The US administration’s new approach in trade policy has not yet sustainably damaged consumer sentiment in Germany, according to an assessment by consumer research institute, GfK. The prospect that a fully functional government will soon be taking up office is likely to have reduced general uncertainty. Sentiment among consumers has continued to improve according to the most recent GfK survey, with both income prospects and the propensity to make large purchases on the rise. At the same time, the propensity to save money has declined somewhat as reflected in the nudge down in the savings rate recorded in the first quarter. Despite these positive signs, the still stagnating level of employment subject to social security contributions and slight decline in employment overall is likely to curb the increase of disposable incomes in the medium term. If the current uptrend stabilises then we will have to upwardly adjust our forecast for private consumption this year of 0.2 percent growth in real terms. Public consumption expenditure is expected to increase by 2.1 percent in real terms according to the current report of the federal government, which is slightly higher than anticipated in January.
Investment in plant and equipment increased slightly at the start of the year following seasonal adjustment. Companies invested less in manpower and equipment but markedly stepped up their acquisition of vehicles compared to the end of 2024. The uptrend here was at a very low level though. Year on year, investment was down by more than three percent and more than ten percent lower than in the year preceding the outbreak of the Covid pandemic. Industrial capacity utilisation rates, which are still very low, combined with the uncertainty surrounding trade policy are two large downward factors currently hampering a sustained pick-up in investment activity. Although the planned increase in state expenditure on military procurement will inject stimulus, this is not expected to be strong and rapid enough to turn the downtrend around this year already. Construction investment should continue to point upwards in 2025. Residential housing investment was slightly higher in the first quarter than in the previous quarter but still negative year on year. The flat upturn in building permits and flat decrease in mortgage rates year on year indicate a slight upward movement in the further course of the year. The government’s special infrastructure fund may provide additional stimulus, but
to what extent the implementation of the fund will have an impact on the economy this year will only become clearer, at the very earliest, once a robust draft budget has been presented. Investment in other assets (software, research and development) in the first quarter was higher than the long-term average so that we will most likely upwardly adjust our forecast here. Despite these probable adjustments to our forecasts, gross fixed capital formation this year is unlikely to be higher than last year.
The largest unknown this year will be the development of German foreign trade. At the start of the year, both exports and imports increased. Tariff and trade policy has and will continue to cause a high degree of uncertainty. The uptrend in exports at the start of the year is likely to have been caused by purchases pulled forward to avoid the tariffs announced by the United States. We will wait until the tariff negotiations between the European Union and the United States have been concluded before adjusting our forecasts. Regarding imports, we expect these to continue to rise, particularly in view of the upward trend in services (travel). All in all, we expect net exports to contribute negatively to growth.
Imprint
Federation of German Industries e.V. (BDI)
Breite Straße 29 10178 Berlin
T: +49 30 2028-0 www.bdi.eu
German Lobbyregister Number R000534
Author
Thomas Hüne
T: +49 30 2028-1592
t.huene@bdi.eu
Editorial / Graphics
Dr. Klaus Günter Deutsch
T: +49 30 2028-1591 k.deutsch@bdi.eu
Marta Gancarek
T: +49 30 2028-1588 m.gancarek@bdi.eu
This report is a translation based on „Quartalsbericht Deutschland II / 2025, Bruttoinlandsprodukt wächst zu Jahresbeginn stärker als erwartet | Wirtschaftsleistung auch im Winterhalbjahr 2024/2025 leicht gestiegen“, as of 6 June 2025
Basic data for national accounts
GDP (price, seasonally and calendar adjusted) Change over previous period in percent
Contribution to growth (in percentage points
Source: Federal Statistical Office