Germany Keeps Recovery Outlook Despite Summer Slowdown
The government raised its growth forecast, while the economy ministry cited energy costs and uncertainty as restraints on near-term activity.
Key takeaways
- Germany’s economy ministry said the recovery continued after a temporary summer slowdown.
- The government raised its growth forecast for this year to 1.3%.
- The budget deficit is forecast to reach 4.1% this year and 4.7% in 2027.
Germany’s economy remained on a recovery path after slowing temporarily over the summer, the Economy and Energy Ministry said in its monthly report. The ministry pointed to a 2% rise in seasonally and calendar-adjusted production in August, driven by strong expansion in construction and related sectors.
The report linked weaker momentum in the third quarter to lower global stocks of energy-intensive goods and disruptions to inland shipping as river levels fell. It said high energy costs, uncertainty and rising financing costs were likely to limit domestic demand in the near term.
Consumer prices rose 3.3% year over year in September. Energy prices were up nearly 15%, the biggest inflation driver, while core inflation held at 2.4%. The seasonally adjusted number of unemployed people increased by 12 thousand in September; employment fell by 29 thousand in August.
Growth forecasts have risen despite those pressures. The government lifted its forecast for this year to 1.3% from 0.5%, while the OECD raised its 2026 estimate to 1.1% from 0.7%, citing export gains from artificial intelligence and investment in defense and infrastructure.
The general government budget deficit is forecast to rise to 4.1% this year from 3% last year, and to 4.7% in 2027. The ministry said the outlook depended significantly on developments in the wars in Iran and Ukraine, warning that persistently high commodity prices would add pressure on companies and consumers.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
