The Frankfurt skyline at dusk on a November day.
Helmut Fricke | Picture Alliance | Getty Images
The German economy shrank by 0.2% quarter-on-quarter in the three months ending in December, according to preliminary data released by Germany’s statistics office Destatis on Thursday.
The figure is adjusted for price, calendar and seasonal variations.
Analysts polled by Reuters had been expecting the gross domestic product (GDP) to decline by 0.1%.
Household and government consumption expenditures increased, but exports were “significantly lower” than in the previous quarter, Destatis said.
“After a year marked by economic and structural challenges, the German economy thus ended 2024 in negative territory,” it added.
Carsten Brzeski, global head of macro at ING, said that there was now “a high likelihood this downturn will lead to a winter recession.”
Germany’s issues appear to be currently concentrated in the country’s industry, but this could change, he said in a note on Thursday.
“Given the importance of industry for the entire economy, spillovers to other sectors – be it via sentiment or real economic channels – are already happening.”
The crucial industry is also not set for a “substantial recovery” as issues with inventories and order books persist and tariffs on exports to the U.S. loom, Brzeski noted.
Thursday’s figures compare to a 0.1% rise of the country’s GDP in the third quarter of last year. Germany’s economic performance has long been sluggish, with quarterly GDP readings mostly hovering around the flatline in the past two years. The economy has however managed to avoid a technical recession.
On an annual basis, the German economy contracted in both 2023 and 2024, by 0.3% and 0.2% respectively.
Some respite is expected in 2025, with the German government on Wednesday revealing its forecast of 0.3% growth for the year — still a notably downward revision from it’s previous estimate of 1.1% growth.
“The diagnosis is serious,” Robert Habeck, economy and climate minister, said during a press conference Wednesday, according to a CNBC translation.
He added that the German economy has been stagnating for a long time. He pointed to both internal and global political uncertainty as factors leading to the cut to expectations, and added that the outgoing government had been unable to fully implement its growth plans as its term was ending early.
A federal election in Germany is slated for Feb. 23, which is earlier than originally planned due to the break up of the country’s ruling coalition late last year.
Habeck also said that there were structural issues weighing on the German economy, echoing comment made by the Finance Minister Jörg Kukies last week.
“The structural weaknesses of our economy absolutely have to be addressed,” Kukies told CNBC. “It’s really important that we embark on a path of economic growth.”