Germany achieves 0.3% growth in first quarter despite headwinds

The German economy grew by 0.3% in the first quarter of 2026 compared to the previous quarter, according to an official estimate released on Thursday.

The surprisingly positive figure, based on preliminary data from the Federal Statistical Office, comes against a backdrop of rising energy prices, fragile supply chains and uncertain export markets, all of which are weighing on activity. 

Higher energy costs — particularly at fuel pumps — are burdening consumers and businesses alike, dampening consumption and investment.

Business sentiment has deteriorated, with a key business index falling sharply in April.

Economists have repeatedly downgraded their forecasts for the year. Leading economic institutes now expect Germany’s economy to grow by just 0.6% in 2026.

The government is even more pessimistic, projecting growth of 0.5%. Before the Iran conflict, many analysts had anticipated growth of around 1% or more.

In 2025, Germany narrowly avoided a third consecutive year without growth, posting a modest expansion of 0.2%. A strong year-end performance helped: GDP rose by 0.3% quarter-on-quarter in the fourth quarter, marking the best quarter for the German economy in three years.

Hopes for Hormuz Strait

"This was a surprisingly good start to the year, especially given that the first quarter was already burdened by the Greenland turmoil and the Iran war," said Sebastian Wanke, economic analyst at German development bank KfW. 

"The hope remains for an early reopening of the Strait of Hormuz, so that the forces of growth can breathe again," he said.

Both private and government consumption expenditure were higher in the first three months of the year than in the final quarter of 2025, according to the statisticians.

Many people have more money in their pockets thanks to rising wages, while government investment in defence and armaments is also supporting the economy. Exports also increased in the first quarter.

However, the message for policymakers must not be "business as usual", warned economist Jens-Oliver Niklasch of Landesbank LBBW. 

"Now is the still right time to initiate reforms," he said.

Unemployment rises compared with last year  

Despite the good economic data, the start of spring brought no turnaround in the German labour market, the Federal Employment Agency said on Thursday.

The number of unemployed in Germany fell by 13,000 in April compared with the previous month, but at 3.008 million remains above the 3 million mark and above last year's figure.

Compared with April 2025, the number of unemployed rose by 77,000.