Germany Returns to Recession: Economy Shrinks by 0.3% in Q2

The German economy contracted by 0.3% in the second quarter of the year, according to revised figures, exceeding initial estimates of a 0.1% contraction. This decline is attributed to a decrease in exports and investments.

Germany's GDP has shrunk in six of the last ten quarters, returning to 2019 levels. The second-quarter contraction is the largest in a year and offsets the 0.3% growth in the previous quarter.

Exports decreased by 0.6%, while investments in capital goods fell by 1.9%. The construction sector saw a 2.1% decline. The increase in public consumption by 0.8% and private consumption by 0.1% partially offset the recession.

Chancellor Friedrich Merz has announced an investment activity of 1 trillion euros to stimulate the economy. Economists expect the results of these policies to be visible next year.

Christine Lagarde warned that the boost in exports seen earlier in the year, due to companies trying to anticipate US tariffs, is 'now reversing'.