German Economy Grows Beyond Expectations Driven by Exports, Despite Global Challenges

Key summary

The research institute of the Handelsblatt newspaper (HRI) has revised its forecast for Germany's real economic growth rate to 1.1% for the current year and 1.4% for the next year, up from previous estimates of 0.5% and 0.3% in the previous quarter. Exports of goods and services increased by 5% compared to the same period last year, with the value of exports increasing by 3.9% in real terms. The chemical and pharmaceutical industries grew in the second quarter, with production increasing by 2.4% and product prices increasing by 5.7%. This was driven by competitors in Asia and the Middle East facing supply chain problems due to the Iran war, leading customers to replenish their inventories. Germany benefited from manufacturers having available production capacity and being able to import fossil fuels from Norway and the United States. Meanwhile, other industries, such as AI and weapons, also helped to boost exports. While investment in fixed assets increased slightly in 2026 and 2027, there were few large-scale expansion investments. Public sector consumption is expected to increase by 3% in 2026 and 2.1% in 2027, compared to 2019, while private sector consumption increased by only 6%. The consumer confidence index fell below pre-pandemic levels in 2020. Although the economy is growing, people may not feel that things are improving due to a declining population and increased taxes.