FXT Financial Focus (Asia-Pacific 08/26)Germany Q2 GDP Revised Higher as Exports Support Growth

Germanys economy continued to expand modestly in the second quarter, performing slightly better than initially estimated. Detailed data released by the Federal Statistical Office on August 25 showed that GDP rose 0.3% q/q after adjustments for price, seasonal and calendar effects, up from the preliminary estimate of 0.2%. Q1 growth was confirmed at 0.4%, following 0.3% in Q4 2025, marking a third consecutive quarter of expansion.

The upward revision was mainly driven by updated trade data. With complete June figures included, exports of goods and services rose 2.0%, led by a 2.6% increase in goods exports, while services exports were broadly unchanged. Imports increased 1.5%, making external demand an important contributor to growth. The revision reflected improved export estimates rather than changes to industrial production or retail data.

Domestic demand remained subdued. Household consumption edged up 0.1% after falling 0.6% in the previous quarter, while government consumption also rose just 0.1%. Construction investment increased 0.1%, but equipment investment fell 1.4%, pulling overall investment down 0.2%. Domestic demand grew only 0.1%, indicating that consumption and business investment have yet to provide meaningful momentum.

On the production side, value added improved across most sectors, although financial and insurance activities declined 0.7%. Labor productivity measured by hours worked rose 1.1%. GDP increased 1.0% y/y, with no significant calendar effect as the number of working days was unchanged from a year earlier. At current prices, quarterly GDP stood at around EUR 1.172 trillion.

Germanys recovery continues to lag the broader European economy, with EU GDP expanding 0.5% q/q in Q2. Fiscal pressure also increased, as the general government deficit reached EUR 71.3 billion in the first half of the year, up EUR 36.6 billion from a year earlier and equivalent to 3.1% of GDP, slightly above the Maastricht reference level of 3%. The return to economic growth has therefore not eased fiscal pressures.

Germanys Economy Ministry continues to forecast growth of 0.5% for 2026, with the GDP revision prompting no change to its outlook. Commerzbank economist Ralph Solveen noted that the recovery since late last year has relied largely on external demand, while domestic demand remains limited. Stronger exports have been offset by declining equipment investment and only a modest recovery in household consumption, leaving Germany in a gradual recovery.

From FXTs perspective, the Q2 GDP upgrade further confirms that Germany is emerging from its prolonged slowdown, but the growth structure remains fragile. Exports may continue to provide near-term support, but a more sustainable recovery will depend on whether stronger external demand feeds through to industrial orders, business investment and household consumption. If domestic demand improves, the recovery could gain a firmer footing; otherwise, continued reliance on exports would leave the economy vulnerable to weaker global trade. The preliminary Q3 GDP release on October 30 will be an important indicator for the full-year outlook.