Economic Key Facts Germany

With a gross domestic product of 4,305 billion euros in 2024, Germany is the third largest economy in the world after the United States and China and just ahead of Japan, making it the largest economy in Europe. In particular, exports of motor vehicles and vehicle parts as well as chemical products have made Germany the third largest export nation in the world to date. At 70%, the service sector accounts for the largest share of the country's gross domestic product (GDP).

The German economy shrank in the second quarter. The Gross domestic product (GDP) fell by -0.1% between April and June 2025 compared to the previous quarter. In the first three months of the year, there had still been unexpected slight economic growth of +0.3%. Experts also attribute the ups and downs of the German economy to the trade conflict with the USA. The first two quarters were strongly influenced for the German economy by the spectacular tariff policy of the USA. Initially, there were pull-forward effects in production, while in the second quarter it was mainly a case of waiting to see how foreign trade conditions would develop. According to experts, whether the economy recovers in the fall depends in particular on private household consumption in Germany.

In order to boost the German economy again, 61 companies have joined the "Made for Germany" initiative. Their pledge: they want to invest at least 631 billion euros in Germany by 2028. The total to date includes both planned and new capital investments, expenditure on research and development as well as commitments from international investors. According to the initiators, a three-digit billion amount "and therefore a significant proportion of the total sum" is attributable to new investments.

The mood among companies in Germany has also continued to improve slightly. The ifo Business Climate Index rose to 88.6 points in July 2025, up from 88.4 points in June 2025, meaning that the most important German economic barometer rose for the seventh month in a row and reached its highest value since May 2024.

The government spending ratio, which indicates the government's influence on an economy, is calculated as total government spending as a percentage of GDP. According to the International Monetary Fund (IMF), this amounted to 49.5% in Germany in 2024 and was therefore higher than the G7 average of 46.1% and the government spending ratio of other major economies such as the UK (44.0%), the USA (37.6%) and China (32.9%).

According to the OECD, the share of tax and social security contributions in total labor costs for average earners in Germany in 2024 was 47.9% for singles without children. This puts Germany in second worst place among the 38 OECD member states after Belgium and well above the OECD average of 34.9%, which weighs on Germany's attractiveness as an investment location. The rate is also significantly lower in countries outside the EU, such as the UK (29.4%) or the USA (30.1%).

Our Business Destination Germany 2024 study provides an assessment of Germany as a business location by international investors. 350 CFOs of the largest German subsidiaries of international corporations from the most important investor countries were surveyed as part of the study to find out how they rate Germany as a business location. As this is the fourth time the study has been published every two years, it also enables trend statements to be made.

The KPMG Global Navigator also provides insights into global growth prospects, opportunities and challenges.

Our CEO Outlook 2024/25, for which 1,325 CEOs of large companies around the world were surveyed, including 125 CEOs in Germany, also provides assessments of the economic situation, generative AI, ESG and other current topics.

Our Future Readiness Monitor 2025, for which 570 top decision-makers in the German economy were surveyed, provides an assessment of German companies' own future viability in the face of new opportunities and complex tasks, their investment plans and their assessment of trends in the coming years.

The current forecasts by German economic research institutes and government organizations for the development of GDP in Germany recently fluctuate between -0.2% and +0.4% for the calendar year 2025 and +0.7% and +1.7% for the calendar year 2026 - but do not yet take into account the recently negotiated customs agreement between the USA and the EU:

German exports grew surprisingly strongly in June 2025 despite another contraction in US business. They grew by +0.8% compared to the previous month (+2.4% compared to the same month last year) to 130.5 billion euros. Rising demand from the EU and China more than compensated for the weakening US business.

Most exports in June once again went to the United States. However, only 11.8 billion euros worth of German goods were sold there, a drop of -2.1% compared to the previous month. This was the third decline in a row and the lowest value since February 2022. Due to higher tariffs, many exports had previously been brought forward and now this demand is missing.

Compared to June 2024, German exports to the USA even fell by -8.4% on a calendar and seasonally adjusted basis. Since August 7, 2025, tariffs of 15% have applied to EU exports to the US; before that, the prime rate was 10% - before Trump took office in January 2025, it was only in the low single-digit range. This exacerbates the situation for many exporting German companies.

Imports also rose by +4.2% compared to the previous month and by as much as +7.9% year-on-year.

With a value of 130.5 billion euros, exported goods significantly exceeded imports of 115.6 billion euros in June 2025. The foreign trade surplus is therefore +14.9 billion euros.

Real (price-adjusted) new orders in the manufacturing sector also fell by -1.0% in June 2025 compared to May 2025, adjusted for seasonal and calendar effects. In a less volatile three-month comparison, however, incoming orders in the second quarter of 2025 were +3.1% higher than in the first quarter of 2025.

In Germany, the inflation rate did not fall below the two percent mark in July as expected. As in June, goods and services were on average 2.0% more expensive than a year ago. The inflation rate excluding food and energy, also known as core inflation, also remained at +2.7%.

Energy became -3.4% cheaper compared to July 2024. According to experts, the year-on-year strength of the euro, which depressed energy import prices, is likely to have played a role here. By contrast, prices for services rose at an above-average rate of +3.1%. Food prices also rose at an above-average rate of +2.2%.

Current forecasts by German economic research institutes and government organizations on the development of the inflation rate in Germany indicate that the rate will remain at around the current level. For the calendar year 2025, the projections fluctuate between +2.0% and +2.4%:

The ongoing economic weakness in Germany continues to put pressure on the job market. The number of unemployed people rose to almost three million in July 2025. According to the Federal Employment Agency (BA), 2.98 million people were unemployed nationwide in July. Compared to the previous month, this represents an increase of around 65,000 unemployed people, but compared to July of last year, the number of unemployed people was 171,000 higher. The unemployment rate rose by +0.1 percentage points to 6.3% compared to June of this year.

An increase in unemployment in the summer months is generally normal due to the start of the summer vacations. However, companies are still reluctant to register new jobs and employment subject to social insurance contributions is barely increasing.

According to recent evaluations by the German Environment Agency (UBA), electricity generation from renewable energies in the first half of 2025 was 142 terawatt hours (TWh), around five percent below the level of the same period in the previous year (149 TWh). This was primarily due to exceptionally low wind conditions in both the winter and spring months. Despite these unfavorable conditions, the share of renewable energies in gross electricity consumption was maintained at 54%.

While electricity generation from wind power fell by -18% and electricity generation from hydropower by -29%, photovoltaics recorded an increase of +27% in the first half of 2025 thanks to favorable solar radiation and continued strong plant construction.

Despite the "lull", wind energy continued to account for the largest share of renewable electricity production at around 43%, followed by photovoltaics (34%), biomass (17%) and hydropower (6%).