Is the German economy on the mend?
Key German economic indicators appear to have bottomed out.
Dr. Jörg Krämer, Dr. Ralph Solveen
Commerzbank Economic Research
05/30/2025
This is mainly due to the ECB's recent rate cuts. The German government's huge fiscal package is also likely to boost the economy soon. The period of negative growth surprises is probably over for now. However, we do not expect a strong, sustained upturn because the US is raising its tariffs and the necessary economic policy reboot in Germany is unlikely to materialize.
Economic indicators have bottomed out
The German economy has been stagnating for more than five years. But the manufacturing sector, which sets the tone for the economy, appears to have bottomed out:
- In the first quarter, order intake (adjusted for volatile large orders) and production were above the level of the fourth quarter of last year. This is a positive sign, even if the March data benefited somewhat from companies bringing forward exports in anticipation of higher US tariffs.
- The Ifo business climate has risen significantly since January despite Trump's tariff announcements.
- Since January, companies have been assessing their order books somewhat more positively again in the Ifo Institute's survey. As this indicator has developed fairly steadily in the past, this is unlikely to be due to random fluctuations and is therefore meaningful.
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