German economy grows 0.2% in Q3 2026, beating forecasts of stagnation

Growth beats forecasts

Germany's gross domestic product rose 0.2% in the July to September quarter compared with the previous quarter, according to a first estimate from the Federal Statistical Office (Destatis) published on Friday, 30 October. Economists polled had mostly expected stagnation or at most a 0.1% gain. The third-quarter figure follows growth of 0.4% in the first quarter and 0.3% in the second quarter of 2026. The summer was weaker than the start of the year, although the recovery has not stalled. The economy kept growing even though the Iran war and low water levels both weighed on activity.

Q1 20260.4%

Q2 20260.3%

Q3 20260.2%

Q1 2026

0.4 %

Q2 2026

0.3 %

Q3 2026

0.2 %

Data from the article text

Drivers and drags

Low water levels on the Rhine slowed inland shipping and disrupted industrial supply chains, while chemicals and steel were hit hard. The expected summer contraction did not materialise. Private consumption edged up slightly, but investment fell according to the preliminary figures. Exports, which had been very dynamic in the first half, weakened noticeably in the third quarter. Higher state spending on infrastructure and defence is cited as the main impetus behind the recovery, while households remain restrained by high prices and a weak labour market.

Alexander Krüger, chief economist at Bethmann HAL, said the upturn rests on public borrowing:

“That the economy delivers the next gain is mainly due to the debt-financed fiscal package. Without this artificially initiated impulse, output would probably have stagnated.”

Labour market and outlook

The Federal Employment Agency (Bundesagentur für Arbeit) reported on the same day that unemployment fell by a seasonally adjusted 40,000 in October to 2.955 million, and the jobless rate dropped by 0.1 points to 6.3%. Compared with October 2025, however, the number of unemployed rose by 44,000. Andrea Nahles, chair of the agency's board, said the economic conditions were still insufficient for a labour market recovery:

“The economic conditions are still not sufficient for an improvement in the labour market.”

The federal government has raised its growth forecast for 2026 to 1.3%, while the Ifo institute in Munich expects 1.4%. Ifo's business climate index has risen for a sixth month in a row, and its survey head Klaus Wohlrabe said Germany is recovering but is not yet back among the leaders. The Berlin-based DIW institute expects a stronger finish to the year, with economist Geraldine Dany-Knedlik saying:

“Germany's economy is apparently starting a year-end sprint, mainly because industry is finally getting back on its feet after years of weakness.”

Neighbours in the eurozone

Spain remained the fastest-growing large economy in the eurozone, with GDP up 0.6% in the third quarter according to the statistics institute INE, in line with analyst expectations. Spain had grown 0.7% in the second quarter and 0.6% in the first. France moved the other way, as the Insee statistics office reported a 0.1% contraction in the summer against analysts' expectation of a 0.1% gain. France had already shrunk slightly in the first quarter and stagnated in the second, and falling investment and exports weighed on the third. Its public finances and government savings plans, which have sparked at times violent protests, have also drawn market attention, and French government bond yields had recently risen to multi-year highs.

Germany0.2%

Spain0.6%

France-0.1%

Germany

0.2 %

Spain

0.6 %

France

-0.1 %

Data from the article text