The German economy grew by 0.4 percent in the first quarter of 2025, according to the Federal Statistical Office (Destatis). This is a slight increase from the initial estimate of 0.2 percent, attributed to a stronger-than-expected performance in March. The production in the manufacturing sector and exports showed a better development than initially anticipated, said Ruth Brand, President of the Federal Statistical Office.
The trade with foreign countries showed a significant increase, with a total of 3.2 percent more goods and services exported, based on a relatively quiet fourth quarter of 2024. The export of pharmaceutical products and of motor vehicles and their parts, which are significant export goods for the US market, increased significantly. The positive development may have been influenced by the anticipation of a potential trade agreement with the US.
Private consumption expenditures, a key driver of the economy, increased by 0.5 percent in the first quarter of 2025, compared to the fourth quarter of 2024. Government consumption, on the other hand, decreased by 0.3 percent, mainly due to preliminary budget decisions by the federal government and some of the federal states, leading to a reduction in state expenditures for goods and services.
Investments in the first quarter of 2025 were higher than in the fourth quarter of 2024, with a 0.9 percent increase in total investments, a 0.5 percent increase in construction and a 0.7 percent increase in equipment investments, marking the second consecutive increase in these areas.
The seasonally and calendar-adjusted gross domestic product (GDP) increased by 0.6 percent in the first quarter of 2025, after four consecutive declines. The manufacturing sector, particularly the chemical industry, the machinery industry and the automotive industry, showed a significant increase in production compared to the previous quarter. The production of metal products, on the other hand, decreased.
The service sector also showed a mixed picture, with a 1.7 percent increase in the information and communication sector, a 1.1 percent increase in the trade, transportation and hospitality sector and a stagnation in the business services sector. The public sector, education and health sector, however, showed a decline of 0.2 percent.
In the year-on-year comparison, the GDP in the first quarter of 2025 was 0.2 percent lower than in the first quarter of 2024 and the seasonally and calendar-adjusted GDP was stagnant.
Investments, in contrast, decreased by 1.0 percent in the first quarter of 2025 compared to the same period of the previous year, with a 3.8 percent decrease in equipment investments and a 1.0 percent decrease in construction investments. The private consumption expenditures, however, increased by 0.5 percent, driven by a growth in consumption of health and transportation services, while the consumption of food and accommodation services decreased.
The seasonally and calendar-adjusted GDP of the service sector decreased by 0.7 percent, with the manufacturing sector showing a decline of 1.6 percent and the construction sector a decline of 3.5 percent, with a decline in all sub-sectors, including high-rise and deep foundation construction.
The labor productivity, measured as the seasonally and calendar-adjusted GDP per hour worked, decreased by 0.5 percent in the first quarter of 2025 compared to the same period of the previous year, while the average hourly wages and salaries of employees increased by 3.9 percent, driven by a higher share of deductions, as the inflation-indexed premium for the first quarter of 2025 was lower than in the same period of the previous year.
The savings rate of private households decreased to 13.0 percent, down from 13.6 percent in the first quarter of 2024, as the consumption of private households increased by 3.2 percent, outpacing their income of 2.5 percent.
In the international comparison, the economic development of Germany was slightly above the European average, with a 0.4 percent growth in the first quarter of 2025, compared to a 0.3 percent growth in the European Union as a whole. Spain, with a 0.6 percent growth, showed the strongest growth, followed by Italy and France, with 0.3 and 0.1 percent growth, respectively. In the United States, the GDP decreased by 0.1 percent in the first quarter of 2025, compared to the fourth quarter of 2024. The economic development in Germany thus lagged behind the majority of EU member states.