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QIV-2025 QUARTERLY REPORT GERMANY

Tiny growth in Germany after two years of recession Industrial production falls fourth year in a row

▪

German economy only gradually emerging from recession. We expect a minimal 0.1 percent rise in real economic output in 2025 overall.

▪

Manufacturing output down for fourth consecutive year. From January up to and including October 2025, manufacturing output was 2.1 percent down year on year.

▪

German foreign trade not benefiting from pick-up in global trade. We expect German exports this year to drop by 0.8 percent in real terms.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Content German economy ................................................................................................................................ 3 German economy stuck in sideways movement ................................................................................... 3 Foreign trade by country ....................................................................................................................... 5 Employment going sideways ................................................................................................................. 6 Incoming orders increases at start of fourth quarter ............................................................................. 7 Order books gradually fattening up ....................................................................................................... 8 Industrial production picks up slightly towards the end of the year ....................................................... 9 Capacity utilisation only recovering gradually ..................................................................................... 10 Manufacturing revenue downward for more than two years now ....................................................... 11 Ifo business climate ............................................................................................................................. 12 Outlook ............................................................................................................................................... 13 Imprint ................................................................................................................................................ 15

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

German economy German economy stuck in sideways movement Economic recovery in Germany is still not taking place. In the third quarter 2025, gross domestic product (GDP) stagnated compared to the previous year following price, seasonal and calendar adjustment. After rising 0.3 percent in the first quarter, Germany’s GDP dropped 0.2 percent in the second quarter compared to the previous quarter. Compared to the fourth quarter 2019, the quarter preceding the outbreak of the Covid pandemic in Germany, GDP is currently only just 0.1 percentage points higher following price, seasonal and calendar adjustment. Year on year, German GDP grew 0.3 percent in the third quarter 2025. As this year and last year have the same number of working days, this also corresponds to the calendar adjusted growth rate. Compared to the other major EU member states, Germany recorded the weakest growth, once again. In the same period, Spain’s GDP increased by 2.8 percent, France’s by 0.9 percent and Italy’s by 0.4 percent. The corresponding figures for the EU and the euro area were, according to the latest data from Eurostat, growth of 1.6 and 1.4 percent respectively. Growth in real GDP in percent 12 10 8 6

3.9

1.7

2 0 -2

-0.5

-0.7

-4 -6

-4.5

-8 -10 -12 -14 I

III

2020

III

2021

III

2022

III

2023

III

2024

2025

change over previous year quarter change over previous quarter change over previous year Source: Federal Statistical Office

In the third quarter 2025, Germany’s economic output was generated by a workforce of around 46 million employees. That corresponds to 23,000 less than one year ago. Employment was also down compared to the previous quarter and after seasonal adjustment (-0.1%). This was the first drop in employment since the first quarter 2021. The total number of hours worked by all employees remained unchanged, according to preliminary estimates by the Institute for Employment Research, the IAB.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

On the income side of GDP, gross value added increased by 0.3 percent in the third quarter 2025 compared to the same quarter last year. Performance was mixed among the individual economic sectors. In agriculture and forestry, activity was down by a slight 0.2 percent. In the manufacturing sector, gross value added dropped for the tenth successive quarter, this time by 0.3 percent. In construction, gross value added has been downward for more than four years now, with a drop of three percent in the third quarter. Gross value added increased the most among public service providers, education and healthcare, going up 1.9 percent, followed by the information and communication sector, which expanded gross value added by one percent. The heavyweight sector of retail, transport and hospitality, grew gross value added by an above-average 0.9 percent. The downward trend in manufacturing activity affected corporate service providers, where gross value added was down on last year by 0.6 percent. Gross value added among financial and insurance service providers dropped year on year by a considerable three percent. Among other service providers, the fall in gross value added was much flatter, at only 0.7 percent. On the expenditure side of GDP, private consumption expenditure increased 0.8 percent in the third quarter 2025 year on year following price adjustment, after rising 1.3 percent in the previous quarter. Consumers spent 3.5 percent more on healthcare and transport than one year ago. Above-average increases were also measured in spending on furnishings, household goods and maintenance (+3.0%), information and communication (+2.3%) and clothing and shoes (+2.1%). Consumers spent one percent more on the major expenditure item of insurance and financial services and other goods and services. Similar scales of growth were registered in expenditure on leisure, sport, culture and education services (+1.1%). Expenditure on housing, energy and water supply increased by a belowaverage 0.5 percent. Spending on alcoholic beverages and tobacco (-2.3%) and hotel and restaurant services (-1.7%) was down, while expenditure on food and non-alcoholic beverages stagnated. State consumption expenditure increased by a clear 1.7 percent in the third quarter, bringing consumption expenditure overall up by 1.1 percent in the summer quarter compared to the same period last year. In the third quarter 2025, gross fixed capital formation was higher year on year for the first time in eleven quarters. The main upward driver here was investment in other assets (patents, licences, software) which rose by almost four percent. The downtrend in investment in plant and equipment, on the other hand, continued, but rather more slowly than in the first half of the year, falling one percent year on year. Downward momentum also decelerated in construction investment, with a drop of only 0.7 percent year on year in the third quarter. Responsible for the weak performance of the construction sector was above all the 1.7 percent contraction in residential construction investment. Investment in commercial construction, on the other hand, increased by one percent while public construction investment rose 0.6 percent. All in all, gross fixed capital formation was a minimal 0.1 percent lower in real terms than in the third quarter last year. Exports of goods and services were down by a slim 0.1 percent in real terms in the third quarter year on year. Looking in more detail, goods exports were down on last year by a slight 0.2 percent, while the export of services continued expanding, rising 0.3 percent. Among imports, goods imports surged 5.4 percent in real terms. The increase was fuelled particularly by the burgeoning import of pharmaceuticals, metal products and electrical equipment. Going the other way, imported services decreased for the first time in four years, going down one percent. The drop here was caused primarily by lower spending on transport services and maintenance and repair services. All in all, imports rose 3.4 percent.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Foreign trade by country In nominal terms, German foreign trade picked up slightly in the third quarter 2025. The export of goods was up by 3.8 billion euros or one percent compared to the third quarter last year, up to 388 billion euros. In absolute terms, the steepest increase was in trade with the Netherlands, with goods exported here increasing by two billion euros or 7.5 percent. The second largest increase was in exports to Poland, which rose by 1.94 billion euros or 8.4 percent, followed by exports to Switzerland (+1.6 billion euros; +9.9%).

German exports and imports in Q3 2025 in selected countries Year-on-year change increase (+) or decrease (-) in exports in million euros

increase (+) or decrease (-) in imports in %

in million euros

in %

Netherlands

28 862

+ 2 023

7.5

China

43 030

+ 1 780

4.3

Poland

25 039

+ 1 943

8.4

Italy

17 724

+ 1 400

8.6

Sitzerland

17 860

+ 1 605

9.9

Czech Republic

15 689

+ 1 357

9.5

France

28 987

+ 1 548

5.6

Netherlands

24 592

+ 1 274

5.5

Austria

20 274

+ 1 518

8.1

USA

24 496

+ 1 004

4.3

Bahamas

1 406

+ 1 401

Poland

19 889

722

3.8

Spain

14 251

+ 1 394

10.8

Vietnam

4 685

682

17.0

Italy

20 230

+ 1 051

5.5

Turkey

6 439

609

10.4

Romania

5 134

582

12.8

Switzerland

12 964

555

4.5

Singapore

1 543

702

31.3

Japan

4 601

- 1 272

21.7

China

20 027

- 1 791

8.2

Irleand

6 177

661

9.7

USA

34 942

- 6 510

15.7

Republic Korea

2 964

891

23.8

Total

387 785

+ 3 829

1.0

Total

+ 14 384

4.4

340 899

Sources: Federal Statistical Office, own calculations

Exports to EU partner countries France, Austria, Spain and Italy expanded by over one billion euros in each case. In contrast, exports to the United States slumped, tumbling 6.5 billion euros or 15.7 percent. Exports to Asia also dropped (China: -1.79 billion euros; Japan -1.27 billion euros). EU sanctions against Russia also had a downward effect, with exports to the country contracting a tangible 320 million euros, or 15.9 percent.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

In the third quarter 2025, German imports increased by 14.3 billion euros or 4.4 percent up to 341 billion euros in nominal terms. The strongest increase was in imports from China, which were 1.78 billion euros or 4.3 percent higher than in the same period last year. Above-average increases were seen in imports from EU partner countries Italy (+1.40 billion euros or +8.6%), the Czech Republic (+1.36 billion euros or +9.5%) and the Netherlands (+1.27 billion euros or +5.5%). In trade with third countries, imports from the United States were up by one billion or 4.3 percent. Imports from Vietnam and Turkey also registered double-digit growth, rising by around 600 billion euros in each case. Imports from South Korea and Ireland went the other way, taking an above-average tumble of 891 billion euros and 661 billion euros respectively. Employment going sideways There is still no real movement on the labour market. According to preliminary data from the Federal Statistical Office, the number of people in employment within the country dropped by 2,000 in October 2025 after seasonal adjustment, following a more pronounced drop of 19,000 in September. Compared to October 2024 and without seasonal adjustment, the number of people in employment was down by 55,000 or 0.1 percent to 46.17 million.

German labour market* 36

4 Unemployed persons (right axis)

2 Employed persons covered by social security (left axis)

2 2022 2021 2020 2017 2023 2025 2016 2019 2018 2024 201 201 201 201 201 201 2 3 4 5 6 7 Difference in the number of workers making social security contributions from the same month last year (right axis)

-1

*seasonally adjusted in million Source: Federal Employment Agency

The number of people in employment subject to social security contributions remained almost unchanged. According to the latest figures, the Federal Employment Agency projections, a total of 35.32 million people were in employment subject to social security contributions in September 2025 (latest figure available). That was only 14,000 more people than one year ago and, after seasonal adjustment, 12,000 more than in August this year. For over two years now, the growth in employment subject to social security contributions has been achieved primarily by an expansion of part-time work. In September 2025, the number of people in part-time employment subject to social security contributions according to preliminary projected figures was 131,000 or 1.2 percent higher than one year ago, totalling 10.86 million. In contrast, the number of people in full-time employment subject to social

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

security contributions decreased by 119,000 people or 0.5 percent down to 24.38 million in the same period. The trends among other forms of employment were as followed: the number of self-employed people including contributing family members continued downwards. According to figures from the Federal Statistical Office, it decreased by 5,000 in the third quarter 2025, after declining 4,000 in the second quarter. Compared to the third quarter 2024, the number of self-employed people was 30,000 or 0.8 percent lower, at 3.66 million. The number of people exclusively in marginal employment dropped by 66,000 or 1.6 percent down to 4.08 million in September 2025, according to preliminary Federal Employment Agency projections. The number of unemployed people in November was 111,000 or four percent higher than one year ago, at 2.89 million (year on year). Seasonally adjusted, the number of unemployed people in November was a minimal 1,000 higher than in October, after contracting in October compared to September. The unemployment rate in November 2025 was 6.3 percent as calculated by the Federal Employment Agency or 3.8 percent according to the ILO definition. Incoming orders increases at start of fourth quarter Incoming orders for industry in October 2025 were 1.5 percent higher than in September 2025 following seasonal and calendar adjustment, according to preliminary data from the Federal Statistical Office. The increase was fuelled above all by a very sharp rise (+87%) in the volatile manufacturing sector of other transport equipment. Orders for metal production also delivered a good performance (+12%). Excluding large orders, incoming orders were 0.5 percent higher than in the previous month. The figures for September were upwardly revised from 1.1 percent up to two percent growth. Factoring in the adjusted figures for September, the third quarter results were as follows: compared to the spring quarter, industry received 2.7 percent less orders following seasonal and calendar adjustment. Orders were also 1.7 percent lower than in the same period last year. This is the first time in two quarters that orders have been negative year on year. Looking at the origin of orders in the third quarter 2025, domestic orders were only 0.3 percent lower than in the second quarter 2025. The drop in foreign orders was much more pronounced, down 4.1 percent in the same period. Demand from the euro area was down by 3.1 percent, not quite as negative as the demand from third countries, which diminished by a clear 4.6 percent after rising solidly in the s econd quarter. Among the main groups of industrial goods, the quarter-on-quarter results following seasonal and calendar adjustment were as follows: Consumer goods producers recorded an increase in orders of 1.6 percent compared to the second quarter 2025. Demand from abroad rose by two percent, slightly more than orders from at home (+0.9%). Among producers of capital goods, orders were a hefty 5.4 percent lower quarter on quarter. Demand from abroad dropped 6.3 percent, considerably more than domestic demand (-3.7%). Year on year, incoming orders were also substantially lower (-3.4%). The producers of intermediates received 1.5 percent more orders in the third quarter 2025 but were 0.8 percent down year on year. While demand from at home increased 3.7 percent, orders from abroad were down slightly (-0.6%).

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Within the manufacturing sector, the heavyweight industry, motor vehicle manufacturing, collected 7.4 percent less orders in the third quarter 2025 compared to the second quarter and following seasonal and calendar adjustment. While demand for electrical equipment increased by 1.7 percent and orders for data processing equipment and optical products rose two percent, orders among producers of fabricated metal products were down by one percent. Demand in the metal processing industry was also slightly down in the third quarter (-1.3%) following a solid rise in the second quarter. The major industry, machinery manufacturing, recovered slightly from its slump in orders in the second quarter (+2.2%). Demand for pharmaceuticals rose by a solid 4.2 percent in the third quarter 2025 compared to the previous quarter. The downward trend in chemicals continued, with orders down by two percent, the industry’s third consecutive quarter of dwindling demand . New orders, manufacturing 120

110 45 100 25

90 3.2

80 70

-2.4

2.7

-2.7

-15

60 50

-35 2020

2021

2022

2023

2024

2025

Change over previous year, two-month-average, in percent (right axis) Volume index in manufacturing, two-month-average, seasonally adjusted (left axis) Change over previous quarter (q-o-q), in percent Source: Federal Statistical Office

Order books gradually fattening up According to ifo Institute figures, the reach of orders in hand in the manufacturing sector was negative year on year for the eleventh consecutive quarter, down to 3.5 production months . Compared to the third quarter, however, order books had not got any slimmer. Among the main industrial sectors, the reach of orders in hand for producers of intermediates was down by a slim 0.1 production months to 2.9 production months. Among capital goods producers, the backlog of orders turned down year on year for the first time in three quarters. Standing at 4.6 production months, it is nonetheless still slightly higher than the long-term average. Order books among consumer goods producers are also fuller than the long-term average and expanded slightly. Their reach of orders in hand was 0.3 production months higher than in the third quarter, up to 2.1 production months, which is 0.3 months above the long-term average. According to the Federal Statistical Office, the order backlog in the manufacturing sector in real terms in September 2025 was four percent larger than one year ago. Unfinished orders from abroad

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

were 4.8 percent higher than in September 2024, while orders from at home increased more gradually, rising only 2.6 percent in the same period. Compared to pre-Covid levels, the order backlog in the manufacturing sector was more than 25 percent higher at last count. Industrial production picks up slightly towards the end of the year At the start of the fourth quarter, not only were the figures for incoming orders positive, but so were the figures for production. In October 2025, industrial production was 1.5 percent higher than in the previous month following seasonal and calendar adjustment, after already rising 1.6 percent in September. Activity in the construction industry also increased robustly (+3.3%). Energy production in October also expanded considerably compared to September (+1.4%). Overall, the output of the production sector was 1.8 percent higher than in the previous month and 0.8 percent higher year on year. Factoring in the adjusted figures for September, industrial production in the third quarter 2025 was one percent lower than in the previous quarter following seasonal and calendar adjustment. Year on year, production was down by 1.3 percent, the ninth cons ecutive decrease. Energy production increased by 0.6 percent compared to the previous quarter following seasonal and calendar adjustment. Year on year, energy production was up more substantially (+3.0%). In construction, activity was 0.8 percent lower than in the previous quarter and 2.1 percent lower than in the same quarter last year. Output in the goods-producing industry year on year change in percent 2023 2024 2025 Jahr Q1 Q2 Q3 original value calendar adjusted

year on year change in percent 2025 Q2 Q3 Aug Sep seasonally and calendar adjusted

Oct

Goods producing sector total

-2.2

-4.5

-2.2

-1.6

-1.2

0.9

-0.7

-0.8

-3.7

1.1

1.8

Industry

-1.2

-4.8

-2.2

-1.8

-1.3

0.9

-0.6

-1.0

-4.7

1.6

1.5

Intermediate goods

-6.2

-5.1

-2.8

-3.1

-0.6

1.2

-1.4

0.3

0.1

0.6

Capital goods

4.7

-5.7

-2.7

-1.3

-2.1

-2.7

-1.3

-2.1

-8.4

3.2

2.1

Consumer goods

-5.5

-2.2

0.0

-0.8

-0.4

2.5

-1.1

-1.5

-3.7

0.7

2.1

Energy

-14.2

-2.7

-0.4

1.7

3.0

1.1

2.0

0.6

0.4

1.9

1.4

Construction industry

-1.7

-3.4

-2.9

-1.8

-2.1

0.9

-2.1

-0.8

-0.2

-1.7

3.3

Sources: Federal Statistical Office, own calculations

Among the main industrial groups, producers of intermediates produced a minimal 0.3 percent more than in the previous quarter following seasonal and calendar adjustment but less than one year ago (-0.6%). Capital goods production was 1.7 percent lower than in the previous quarter and 2.1 percent lower than one year ago. Consumer goods production was also weak. It was 1.5 percent lower than in the previous quarter and 0.4 percent lower year on year.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Among the individual industries, performance in the third quarter 2025 year on year was as follows: motor vehicle manufacturing (-4.7%) and chemicals (-4.3%) both curbed output considerably. The production of textiles and non-metallic mineral products contracted by more than four percent. For the first time in over three years, producers of other transport equipment (aircraft, ships, railway vehicles) produced less than in the same quarter last year (-3.2%). In the energy-intensive industries, output in the metal industry (-1.2%) and paper industry (-2.4%) continued the downward trend that it has now lasted for more than two years. Output among machinery manufacturers in the third quarter was down by a slight 0.3 percent year on year. The few industries that bucked the downward trend and expanded production year on year included food (+0.4%), the electro industry (+1.7%) and pharmaceuticals (+3.4%). Based on the course of the year so far, we expect manufacturing output in 2025 to contract by two percent overall. This would be the fourth consecutive year of downward industrial production in Germany. Production, manufacturing 110

40 30

100

20 10

0.9

0.9 0

-0.6 -1.0 80

-10 -20

-30 2020

2021

2022

2023

2024

2025

Change over previous year, two-month-comparison, in percent (right axis) Volume index in manufacturing, two month average, seasonally adjusted (left axis) Change over previous year (q-o-q), in percent Source: Federal Statistical Office

Capacity utilisation only recovering gradually The capacity utilisation rates of production facilities in the manufacturing sector increased at the start of the fourth quarter 2025 for the third consecutive time. The capacity utilisation rate in manufacturing was at 78.2 percent according to ifo Institute figures, which was 1.6 percentage points higher than one year ago. Although capacity utilisation was still five percent lower than on average over the last ten years, it was well above the lows recorded during the financial crisis and the Covid pandemic (70.3% in both cases). The manufacturing sector is nonetheless still in its longest phase of underutilisation ever recorded. It has lasted for ten quarters now. Almost all manufacturing industries are currently operating at below their average long -term capacity utilisation rate. Among the producers of chemical products, capacity utilisation at 71 percent was more than ten percentage points below the long-term average. Among producers of data processing

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

equipment (77.9%) and textiles (69.7%), capacity utilisation was more than eight percent below the long-term average. In machinery manufacturing, capacity utilisation increased by 0.8 percentage points, up to 78.4 percent, but was still almost seven percent below its ten -year average. Among producers of electrical equipment (77.2%) and metal products (75.1%), capacity utilisation was 6.3 percent lower than on average over the last ten years in both cases. Capacity utilisation among producers of furniture (80.1%) and food, tobacco and beverages (77.9%) were almost five percent and three percent lower respectively. Positive exceptions to the broad downward trend, was among producers of motor vehicles and automotive parts and pharmaceuticals. Capacity utilisation in both cases was higher than on average, 0.3 and 3.6 percentage points higher respectively. Manufacturing revenue downward for more than two years now In the third quarter 2025, manufacturing revenue following price adjustment was 1.2 percent lower than in the previous quarter. This was the third consecutive quarterly decrease. Year on year, revenue was down for the ninth quarter in a row, this time by minus 1.1 percent. While d omestic revenue was 0.8 percent lower year on year, revenue from abroad was down by a slightly bigger 1.5 percent. Foreign revenue from trade within the euro area was 1.4 percent higher in the third quarter 2025 than in the same quarter last year. Revenue from trade with third countries contracted, on the other hand, going down 3.3 percent. For the first nine months of the year, revenue was 1.8 percent lower (original figures) year on year in real terms, with revenue from at home down by 2.3 percent, slightly more than revenue from abroad (-1.5%). Manufacturing revenue* January till September 2025 Pharmaceuticals

5.3

Other transport equipment production

4.3

Food and Luxury food

2.5

Electronic industry

2.0

Mashinery manufacturing

1.7

Metal industry

0.5

Manufacturing

-0.9

Motor vehicle production

-1.8

Textiles, fashion & leather

-2.0

Chemical industry

-2.5

Paper industry

-2.7

Glas, ceramics, stone, industrial minerals Energy-intensive

-3.3 -6.4

*Change in percent, year on year Source: Federal Statistical Office

Looking at the individual industries, the pharmaceutical industry was able to increase its revenue by 5.3 percent in the first nine months of the year compared to the same period last year, followed by motor vehicle manufacturing (+4.3%) and food, beverages and tobacco (+2.5%). Despite downward production, both the electro industry (+2.0%) and machinery manufacturing (+1.7%) had higher revenue up to and including September than in the same period last year. Revenue in the metal industry was also slightly higher (+0.5%). Compared to the average performance across the manufacturing sector (-0.9%), motor vehicle manufacturing revenue shrank more (-1.8%), as did textiles (-2%). In the

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

energy-intensive industries, the chemical and paper industries both saw revenue fall by more than two percent. Revenue among producers of non-metallic minerals was also down by a good three percent. Ifo business climate The ifo business climate index for Germany turned down again in November after recovering in October. Although the surveyed companies rated their current situation as slightly improved for the first time in three months, they were substantially more negative about their business prospects, which pulled down the overall result. Among the individual sectors, wholesalers and retailers were less positive both about their current situation and about their prospects. Particularly retailers were disappointed at the start of the festive season. Ratings among service providers concurred with the overall trend, with current business rated more positively and prospects less so. A tangible drop was recorded in ratings among transport and logistics service providers. Sentiment in tourism brightened up, on the other hand. Business sentiment in mainstream construction deteriorated slightly for the second consecutive month. Although companies in the industry rated their current situation as positive, they were again more pessimistic about their prospects going forwar d. In the manufacturing sector, the business climate index pointed down again following a little nudge up in October. Although companies were slightly more satisfied with their current situation, they were considerably less optimistic about the future. The ifo economic barometer for manufacturing is therefore still in the recession quadrant. Export prospects have also turned down again. For the first time in two months, most export-oriented companies are again feeling pessimistic. Ifo Business-Cycle Clock German manufacturing* 30 Upswing

Boom

Business expectations for the next six month

20 Jan 2021

Jan 2022

Jan 2018

Jan 2017

0 November 2025

Jan

-10

Jan 2020

-20 Jan 2025

-30

Jan 2019

Jan 2023

Jan 2024

-40 -50 Downswing

Recession -60 -60

-50

-40

*Balances, seasonally adjusted

-30

-20

-10

Assesment of current business situation

Source: ifo Institut

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Outlook Despite major events, including the start of Donald Trump’s second term in office as President of the United States, federal elections in the European Union’s largest economy, a suspension of the debt brake and the approval of a special fund with a volume of over half a trillion euros even before the new Bundestag had constituted and the new federal government had taken up office, the German economy has not shown any real impetus either way. The 0.3 percent rise in GDP at the start of the year, which meanwhile classifies as a pronounced rise, was attributable to activity pulled forward in anticipation of the protectionist US tariff policy which caused a short-term pick-up in global trade and the first exportdriven growth impetus the German economy has experienced for some time now. This nudge up was followed by a rebound in the second quarter, which was, in turn, followed by stagnation. It is already bordering on a miracle that the German economy is not on track for contraction again this year, even though investment in plant and equipment is downward for the third consecutive year and construction investment is heading for its fifth consecutive downward year and foreign trade has not contributed any growth impetus for three years now. Private consumption has therefore proved to be more significant for economic growth than usual this year, but its contribution remained low. Although lower inflation and nominal wage rise of more than two percent have lifted disposable incomes, this upward momentum has been tangibly stifled by rising social security contributions and changed savings behaviour. Overall, private consumption spending only increased by one percent in the first three quarters of the year compared to the same period last year. According to market research institute GfK and the Nuremberg Institute for Market Decisions (NIM), consumer sentiment in Germany has exhibited moderate changes but not a uniform trend. While the propensity of consumers to make large purchases increased for the second successive time and the savings rate declined slightly, economic and income expectations deteriorated slightly. We are therefore sticking to our growth forecast for private consumption of up 1.3 percent this year in real terms although this will require consumption to pick up slightly in the fourth quarter. Public consumption expenditure increased 2.3 percent in the first three quarters of the current year compared to the same period last year, exceeding our expectations from autumn. In view of the course of the year so far and the amended assessment of the federal government, we are therefore upwardly revising the growth rate we forecast for public consumption from 1.7 percent up to two percent. Overall, this would result in an increase in consumption expenditure in 2025 of 1.4 percent. Investment in plant and equipment dropped by 3.2 percent overall in the first three quarters of the year compared to the same period last year. While drops of more than four percent were recorded in the first two quarters, the downward momentum slowed down substantially in the third quarter. First expenditures under the special fund for infrastructure and climate neutrality have probably been released by now. Furthermore, after a long pause in investment, there is undoubtedly a degree of replacement investment that cannot be postponed any longer. We therefore stick to our growth forecast of minus three percent for investment in plant and equipment in 2025 overall. In construction investment, we do not see a need to change our forecast either of minus 1.5 percent. Construction investment in the first three quarters of the current year decreased by 1.4 percent overall, although the drop at the start of the second half of the year was a lot less pronounced than at the start of the year. Residential construction investment has continued to point down but, here too, the downward momentum has eased off. At the same time, the upturn in non-residential construction has continued. In civil engineering, which comprises primarily of investment in transport and distribution networks, investments have risen continuously in the last six quarters. Investment in other assets (software, research

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

and development) has increased by a total of 3.8 percent in the first three quarters of the year, as expected, so we are sticking to our forecast of an overall annual increase of four percent here. In sum, this results in a decrease in gross fixed capital formation of one percent compared to the previous year. In the first three quarters of the current year, exports dropped by 1.1 percent compared to the same period last year, according to the national accounts. As in the last three years already, German exporters have not been able to participate in the pick-up in the global trade in goods, which, in the third quarter, expanded by more than four percent year on year. In view of the course of the year so far, we are sticking to our forecast and still expect German exports to decrease by 0.8 percent. German imports increased by around three percent in each of the first three quarters of the year. The import of services steadily decreased over the year, while the uptrend in the import of goods continued to speed up. Overall, imports should rise, as forecast, but in a different composition, by three percent. Net exports would then contribute negative growth of around 1.5 percentage points to GDP. All in all, we expect Germany’s gross domestic product in the current year to increase by 0.1 percent year on year in real terms. The German economy would then narrowly escape a third year of recession. BIP forecast for 2025: Change in real economic output over the previous year in percent

2025

Federal Government 2025

Board of Experts 2025

GDP, real

0.1

0.0

0.2

Consumption

1.5

1.2

- Private Consumption

1.3

0.2*

0.9**

- Public Consumption

2.0

2.1

2.0

-1.0

0.4

-0.9

- Machinery and Equipment

-3.0

0.7

-2.4***

- Construction

-1.5

-0.4

-1.7

- Other

4.0

2.4

3.7

Exports

-0.8

-2.2

-0.2

Imports

3.0

1.8

3.5

Net Exports, Economic Output

-1.5

-1.4

BDI

Investment

Sources: Federal Government (April 2025; * Private households and private non-profit institutions serving households), Board of Experts (November 2025); ** including private households and private non-profit institutions,*** including military weapon systems, own calculations

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Imprint Federation of German Industries e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu German Lobbyregister Number R000534 Author Thomas Hüne T: +49 30 2028-1592 t.huene@bdi.eu Editorial / Graphics Dr. Klaus Günter Deutsch T: +49 30 2028-1591 k.deutsch@bdi.eu Marta Gancarek T: +49 30 2028-1588 m.gancarek@bdi.eu

This report is a translation based on „Quartalsbericht Deutschland IV / 2025, „Nach zwei Rezessionsjahren nur Mini-Wachstum in Deutschland | Industrieproduktion sinkt das vierte Jahr in Folge“, as of 16 December 2025.

Tiny growth in Germany after two years of recession | Industrial production falls fourth year in a row 23/12/2025

Basic data for national accounts GDP (price, seasonally and calendar adjusted) Change over previous period in percent 2024

2025

2023

2024

Consumption

-0.5

1.1

0.4

0.2

0.0

-Private Consumption

-0.7

0.5

0.2

0.4

0.6

0.1

-0.3

-Public Consumption

-0.2

2.6

1.0

0.5

0.2

0.8

Investment

-2.0

-3.3

-0.5

0.6

0.3

-1.1

0.3

-Construction

-5.9

-3.4

-0.7

0.7

0.2

-1.1

-0.5

-Machinery and Equipment

-0.5

-5.4

-1.0

0.0

0.6

-2.6

1.1

-Other

6.6

0.2

0.9

1.1

-0.5

1.2

0.9

Domestic Demand

-0.9

0.2

1.0

1.1

-0.1

0.3

Exports

-1.4

-2.1

-1.7

-2.1

2.4

0.3

-0.7

Imports

-1.4

-0.6

0.7

0.1

1.5

1.7

0.0

Total

-0.9

-0.5

0.0

0.2

0.3

-0.2

0.0

Contribution to growth (in percentage points Consumption

-0.2

0.8

0.3

0.1

0.0

-Private Consumption

-0.2

0.2

0.1

0.2

0.3

0.1

-0.1

-Public Consumption

0.0

0.6

0.2

0.1

0.0

0.1

0.2

Investment

-0.3

-0.6

-0.1

0.1

-0.2

0.1

-Construction

-0.4

-0.1

0.1

0.0

-0.1

-Machinery and Equipment

-0.1

-0.4

-0.1

0.0

-0.2

0.1

-Other

0.2

0.0

0.1

0.0

Change in stocks

0.1

0.8

0.6

-0.5

0.4

0.2

Domestic Demand

-0.4

0.2

1.0

1.1

-0.1

0.3

Net exports

0.1

-0.4

-1.0

-0.9

0.4

-0.5

-0.3

Source: Federal Statistical Office