Germany’s Growth Slows This Quarter

Germany's Growth Slows This Quarter

The German government’s latest assessment indicates a noticeable slowdown in the recent economic upturn within Germany. Following a period of revitalization at the beginning of the year, the second quarter is showing signs of reduced momentum, as detailed in the Federal Ministry for Economic Affairs and Energy’s monthly report released this week.

While sentiment indicators, particularly regarding business expectations, have improved in recent months, the latest data on economic performance paints a more cautious picture. Production within the manufacturing sector rebounded somewhat after a substantial decline in April; however, the truck toll performance index – a leading indicator for industrial production – suggests a weakening trend for June.

New orders for manufactured goods have remained volatile against a backdrop of ongoing trade and geopolitical uncertainties. Following a robust recovery in merchandise exports early in the year, partly anticipated due to planned tariff increases by the US administration, these exports have demonstrably slowed in the first two months of the current quarter, especially concerning trade with the United States. The ministry anticipates that foreign trade will exert a dampening effect on overall economic growth during the second quarter.

The initially apparent economic rebound at the start of the year does not appear to be sustaining its pace into the second quarter. Aside from the normalization of anticipatory effects observed in the first quarter – driven by expectations surrounding the announced US tariffs – this deceleration is attributed to the persistently uncertain trade and geopolitical environment. The associated uncertainty is expected to persist, extending the period of suspension of so-called “reciprocal” tariffs, initially prolonged by US President Trump until August 1st.