Decline in Equipment and Construction Investment
Increase in Private and Public Spending
The Federal Statistical Office of Germany announced on July 30 (local time) that the country's gross domestic product (GDP) for the second quarter had decreased by 0.1% compared to the previous quarter, according to preliminary data. As a result, Germany's economic growth rate has returned to negative territory for the first time in four quarters since the second quarter of last year (-0.3%).
The statistical office stated that equipment and construction investment declined, while both private and public spending increased.
The German economy experienced unexpected growth in the first quarter of this year, prior to the United States' full-scale imposition of tariffs on imports, as orders for automobiles and pharmaceuticals surged. The statistical office revised the first quarter GDP growth rate from 0.4% to 0.3%, but this was still the largest increase in ten quarters since the third quarter of 2022.
Ulrich Kater, chief economist at Dekabank, said, "In the first two quarters of this year, the German economy was significantly affected by the dramatic US tariff policy," adding, "Once the dust settles from the tariff shock in the coming period, it will become clear that Germany's economic momentum remains weaker than that of its European neighbors."
The German economy recorded negative growth rates in both 2023 and last year, and is now on the verge of experiencing its first-ever three consecutive years of contraction. The International Monetary Fund (IMF), reflecting recent developments in tariff negotiations between the United States and other countries, raised its forecast for Germany's economic growth rate this year from 0.0% to 0.1%, and for the eurozone (20 countries using the euro) from 0.8% to 1.0%.
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