Overview

• German GDP expanded 0.4% in the first quarter of 2025, double earlier estimates and opening the door to modest annual growth.
• Bundesbank’s early June forecast of stagnation for 2025 did not include the unexpectedly strong first-quarter performance.
• Nagel said fiscal measures on infrastructure and defense will support the economy by 2026 but sustainable growth requires structural reforms.
• He cautioned that US tariff policies under President Trump continue to weigh on Germany’s export-driven industrial sector.
• Middle East tensions risk driving up oil prices, and the ECB’s cautious stance despite near-target inflation may limit further monetary easing.