Gross domestic product: Detailed results on economic performance in Q2 2026

KUALA LUMPUR, 25 AUGUST 2026 —

Germany’s Economy Grows 0.3% in Q2 2026, Exports Drive Expansion

“The growth momentum seen at the start of the year has continued,” Destatis President Ruth Brand said in a statement. “As in the first quarter, the increase was primarily driven by strong export performance,” she added.

The revised figures paint a slightly more positive picture than the preliminary estimate, with stronger-than-expected retail sales and upward revisions to June 2026 trade data contributing to the upgrade. Exports rose by 2.0% in real terms compared with the first quarter of 2026, driven entirely by goods exports, which increased by 2.6%, while service exports remained flat. Imports grew by 1.5%, with goods imports up 2.1% and service imports up 0.3%.

Investment activity, however, showed weakness. Gross fixed capital formation fell by 0.2% in real terms, with equipment investment—including machinery, appliances and vehicles—declining by 1.4%. Construction investment edged up by 0.1%, a modest rebound after a weak start to the year due to unusually cold weather.

Private and public consumption both grew by just 0.1% quarter-on-quarter, indicating subdued domestic demand despite the broader economic expansion.

Sectoral Performance Reflects Uneven Recovery Real gross value added rose by 0.4% in the second quarter, matching the gains of the previous two quarters. Manufacturing led the way with a 0.9% increase in output, supported by growth in chemicals and electrical equipment. Food production and machinery repair saw declines, while construction output was nearly unchanged, down 0.1%.

Most service sectors expanded, with information and communication, real estate, and public services, education and health all posting gains of 0.6%. Financial and insurance services were the exception, with a 0.7% contraction.

Year-on-year, Germany’s GDP was 1.0% higher in real terms in Q2 2026 than in the same period of 2025. Exports grew by 3.7% in real terms, driven by a 5.0% surge in goods exports, particularly chemicals, IT equipment, electrical and optical products, and other vehicle manufacturing. Exports to the European Union were the main driver. Service exports dipped slightly by 0.1%.

Imports rose by 2.5% in real terms, led by a 4.2% increase in goods imports, including pharmaceuticals, IT equipment, electrical products, and motor vehicles. Imports from the United States, China and the EU all increased. Service imports fell by 1.2%, largely due to lower transport services.

Equipment investment rose by 1.1% year-on-year, supported by higher state spending, including defense-related capital outlays. Investment in machinery and equipment increased, while vehicle investment declined. Construction investment fell sharply by 1.5% due to rising costs.

Private consumption grew by just 0.1% year-on-year, while government consumption surged by 3.0%, reflecting higher federal spending and increased social benefits, particularly in health and long-term care insurance.

Real gross value added increased by 1.1% year-on-year, with manufacturing output up 1.1%—the first annual gain since Q1 2023. Output rose in other vehicle manufacturing and electrical equipment, while motor vehicle producers saw declines. Construction output fell by 1.6%, with civil engineering posting strong gains but building finishing continuing to decline.

Service sectors recorded broad-based growth, with information and communication up 3.9% and public services, education and health up 2.1%. Business services and financial and insurance services saw minimal changes, each rising by 0.3%.

Employment Declines as Labor Market Softens Economic output in Q2 2026 was generated by approximately 45.7 million people employed in Germany, a decrease of 212,000, or 0.5%, compared with Q2 2025. Employment in service sectors fell for the first time since the COVID-19 pandemic, while manufacturing and construction continued to see year-on-year declines in headcount.

Average hours worked per employee remained unchanged year-on-year at 0.0%, according to preliminary estimates from the Institute for Employment Research (IAB) of the Federal Employment Agency. As a result, total hours worked across the economy fell by 0.5%.

Labor productivity, measured as real GDP per hour worked, increased by 1.5% year-on-year. On a per-employee basis, productivity was also up 1.5% compared with Q2 2025.

In nominal terms, GDP rose by 3.8% year-on-year, while gross national income increased by 4.1%. National income grew by 4.3%, with corporate and property income up 5.5%—the strongest gain since Q2 2023. Wages and salaries rose by 3.4%.

Regional and Global Implications Germany’s steady but modest growth in Q2 2026 underscores its role as Europe’s largest economy and a key driver of regional trade. The continued strength in exports, particularly to the EU, supports intra-regional demand, while the decline in construction investment reflects ongoing cost pressures and labor shortages in the sector.

For Malaysia, a key trading partner in Southeast Asia, Germany’s export-driven growth may provide opportunities in sectors such as electrical and optical products, chemicals and machinery, where Malaysian firms are active in global supply chains. However, the weak performance in motor vehicle production could limit demand for automotive components from Malaysia.

The softening labor market in Germany, marked by falling employment in services and manufacturing, may also affect Malaysian workers in sectors such as IT, engineering and healthcare, where German demand for skilled labor remains significant.

Outlook Remains Cautious While the upward revision to Q2 2026 GDP offers a modest boost to confidence, risks remain. Weak domestic demand, particularly in private consumption, suggests that the recovery is still fragile. The decline in construction investment points to ongoing challenges in housing and infrastructure, while financial services continue to face headwinds.

Looking ahead, Germany’s economic trajectory will depend on external demand, particularly from Asia and the EU, as well as domestic policy measures to stimulate investment and consumption.

For now, the data confirms a gradual recovery, but one that remains uneven across sectors and dependent on global trade dynamics.