The German economy is sending mixed signals. The Federal Statistical Office reported that inflation in February 2026 unexpectedly dropped to 1.9%, the lowest level in months. Simultaneously, data indicates a systematic increase in real wages, boosting consumers' purchasing power. Despite these optimistic indicators, the labor market remains stagnant, and the number of unemployed still exceeds the three-million threshold.
Inflation falls below target
The price growth indicator in Germany decreased in February to 1.9%, mainly due to cheaper fuels and energy.
Increase in purchasing power
Thanks to the decline in inflation and wage increases, real wages are growing faster than the prices of goods and services.
Stagnation in the labor market
The number of unemployed in Germany still exceeds 3 million, and the unemployment rate has stalled at 6.3%.
The latest macroeconomic data from Germany indicates a clear slowdown in price growth dynamics. In February 2026, inflation in the largest economy of the eurozone fell to 1.9% year-on-year, surprising many analysts who had expected higher readings. The main factor curbing price increases turned out to be falling energy prices, which relieved household budgets. This situation, combined with previously negotiated wage increases in collective agreements, resulted in another quarter of growth in real wages. This means that for the first time in a long while, Germans' incomes are growing faster than the cost of living. Germany struggled with record inflation following the energy crisis triggered by Russia's invasion of Ukraine in 2022, which led to the sharpest decline in real incomes in decades. Despite the improvement on the consumption side, the German labor market shows signs of weakness stemming from general economic stagnation. The Federal Employment Agency reported that the unemployment rate remained at 6.3%, and the number of unemployed still exceeds three million. Experts note that although in some regions, such as North Rhine-Westphalia, local declines in the number of unemployed are visible, the nationwide trend remains flat. The lack of a clear recovery means companies remain cautious about creating new jobs, and open positions—as noted by regional media—are often generated by specific sectors, including the Bundeswehr. „Die Kaufkraft der Arbeitnehmer in Deutschland ist im Februar erneut gestiegen, da das nominale Lohnwachstum die Inflationsrate deutlich übertraf.” (The purchasing power of employees in Germany rose again in February, as nominal wage growth clearly exceeded the inflation rate.) — Federal Statistical Office (Destatis) Regional disparities are clearly visible in states such as Bavaria, Lower Saxony, and Thuringia, where the increase in purchasing power is most noticeable. At the same time, customs authorities are intensifying checks on companies, suspecting a rise in the scale of undeclared work, which can be a natural market reaction to high non-wage labor costs during a slowdown. Investors are closely monitoring this data, as it may prompt the European Central Bank to make faster decisions on interest rate cuts, which would be a boost for the struggling industrial and construction sectors.
Perspektywy mediów: Liberal media emphasize the increase in purchasing power and success in fighting inflation as proof of the effectiveness of wage adjustments. Conservative media focus on the persistently high unemployment above 3 million and economic stagnation.