Economy grows slightly at the start of the year

Frankfurt/Main (dpa) - Mini-growth at the start of the year, but a gloomy outlook: The German economy grew by 0.2 percent in the first three months compared to the previous quarter, according to preliminary data from the Federal Statistical Office. Both private consumer spending and investments grew.

However, the third recession in a row is looming for the year as a whole, not least because US President Donald Trump's aggressive tariff policy has clouded the global economic outlook. In the final quarter of 2024, the German economy shrank by 0.2%.

The weak economy is making itself felt on the labor market. Although the number of unemployed people in Germany fell by 36,000 in April to 2.932 million compared to the previous month thanks to a slight upturn in the spring. However, this is 182,000 more than a year ago, according to the Federal Employment Agency in Nuremberg.

Tariff dispute dampens economic hopes

US President Donald Trump has thrown trading partners and financial markets into turmoil with his XXL tariff package, and his zigzag course is causing additional uncertainty - which is poison for the global economy. As an exporting nation, Germany is particularly affected by Trump's tariff offensive: The USA is Germany's most important trading partner, ahead of China and the Netherlands, and the largest buyer of German exports. In 2024, a good ten percent of all German exports - goods with a total value of over 161 billion euros - went to the United States.

German economy in permanent crisis

Instead of the longed-for upturn after two years in the doldrums, Europe's largest economy is facing its third consecutive year without growth - something that has never happened before in the history of the Federal Republic of Germany. The already low expectations have been lowered in recent weeks.

The current German government expects gross domestic product (GDP) to stagnate this year. In January, it had still expected growth of 0.3%. The International Monetary Fund (IMF) also does not expect the German economy to grow this year. The IMF expects a global slowdown in growth due to Trump's aggressive tariff policy.

New federal government wants to boost the economy

Following the change of government in Berlin, the CDU/CSU and SPD have pledged to quickly introduce a number of measures to boost the domestic economy: lower energy costs and corporate taxes, more flexible labor laws and less bureaucracy. CDU politician and energy manager Katherina Reiche is to take over from Robert Habeck (Greens) and lead the German economy out of the crisis.

The domestic economy is likely to be boosted by the federal government's huge billion-euro package for defense and infrastructure - albeit not immediately. The IMF expects the multi-billion euro financial package to have a positive impact on the German economy from 2026. According to economists, this could put an end to the economic slump in Germany: They believe the German economy will grow by between one and one and a half percent in 2026.