Berenberg on Germany's Downward Revision in GDP

08:21 AM EDT, 08/22/2025 (MT Newswires) -- The German statistical office on Friday revised down Q2 gross domestic product contraction to 0.3% quarter over quarter from a 0.1% decline, noted Berenberg.

Weak June data, including for industrial production and construction, that wasn't available at the time of the first GDP estimate, had already strongly hinted at a downward adjustment, noted the bank.

However, the extent of the change was larger than Berenberg had anticipated -- it had predicted a revision to a 0.2% quarter-over-quarter decline while Reuters consensus had called for an unchanged 0.1% decline. Looking at the first half of 2025 as a whole, GDP moved roughly sideways, with the drop in Q2 mostly reversing the 0.3% quarter-over-quarter gain in Q1.

In the bank's view, there is a good chance that the volatility can simmer down now -- Berenberg expects GDP to edge up by 0.1% quarter-over-quarter in Q3.

Now that the United States and the European Union have reached an agreement on tariffs, the back-and-forth chaos in international trade can subside, pointed out the bank. Early indicators such as the Purchasing Managers' Index (PMI) also point to a modest ongoing recovery.

After loosening the debt brake, the German government set out plans for a large-scale fiscal boost. However, it will likely take until late this year before deficit spending starts to ramp up "significantly." Once this happens, GDP growth can accelerate towards rates of 0.4% quarter over quarter in 2026, according to Berenberg.

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