Germany is 0.3 Percent Away from Recession

The German economy could experience slight growth in the third quarter, according to the central bank in its regular monthly report, indicating that Germany could narrowly avoid recession.

“Overall, real gross domestic product (GDP) could slightly increase in the third quarter of 2025, viewed from the current perspective,” experts from Bundesbank estimate in a report published on Thursday.

Positive summer months eliminate the threat of recession

The economy is relatively stable under difficult conditions, they added. Activity in the largest European economy decreased in 2023 and 2024, and after a modest recovery in the early months of this year, it fell again in the period from April to June by 0.3 percent. This means that a positive result in the summer months would eliminate the threat of recession, which economists generally define as a decline in activity for two consecutive quarters.

Investment conditions remain unfavorable due to higher U.S. tariffs, but there are no indications that they significantly slowed down in the period from July to September, note experts from the central bank. Industrial production also started the third quarter in the positive, primarily thanks to the engineering sector, and its decline in June was significantly milder than preliminary estimates had indicated.

Demand for industrial goods is rising

“The underlying trend in demand for German industrial goods continues to show an upward trajectory,” it was stated.

Reduced deliveries to the U.S. market are unlikely to impact the economy in the third quarter as strongly as during the spring, the Bundesbank forecasts. Leading economic institutes expect Germany’s GDP to grow by 0.3 percent for the entire year of 2025.