Weakness in manufacturing and exports pushed Germany’s economy into a contraction at the end of 2024, final data showed Tuesday, with the slowdown a key challenge for the incoming government.
Output in Europe’s biggest economy slipped 0.2 percent from October to December compared to the previous quarter, in line with a preliminary estimate, complete figures from federal statistics agency Destatis showed.
While the agency noted that although “the EU as a whole slowed towards the end of the year”, Germany’s growth was below the wider bloc and other major regional economies.
The economic woes of the eurozone’s traditional powerhouse are one of the major challenges awaiting Friedrich Merz, who won a national election at the weekend and is set to become the country’s next chancellor.
In the final quarter of last year, economic performance in the crucial manufacturing sector fell 0.6 percent, marking the seventh consecutive drop, according to Destatis.
There were “substantial decreases” in the manufacture of machinery and motor vehicles, highlighting the crisis battering Germany’s flagship auto sector.
Meanwhile exports saw their sharpest decline since the second quarter of 2020, dropping 2.2 percent, the figures showed.
Economic performance in the construction sector also slipped 0.9 percent.
Household consumption — closely watched for signs that an economic recovery could be taking hold — almost stagnated.
Germany’s economy shrank both last year and in 2023, hit by a manufacturing slowdown, falling exports to key markets such as China and deep-rooted problems like skilled labour shortages.
There is little hope of a strong rebound in 2025, with the government now forecasting just 0.3 percent growth for the whole year.
US President Donald Trump’s tariff threats have added to headaches for German businesses, as the United States was Germany’s top trade partner last year.