German economy shrinks by 0.2% in fourth quarter, more than expected

The German economy shrank by 0.2% quarter-on-quarter in the three months ending in December, according to preliminary data released by Germany's statistics office Destatis on Thursday.

The figure is adjusted for price, calendar and seasonal variations.

Analysts polled by Reuters had been expecting the gross domestic product (GDP) to decline by 0.1%.

Household and government consumption expenditures increased, but exports were "significantly lower" than in the previous quarter, Destatis said.

"After a year marked by economic and structural challenges, the German economy thus ended 2024 in negative territory," it added.

Carsten Brzeski, global head of macro at ING, said that there was now "a high likelihood this downturn will lead to a winter recession."

Germany's issues appear to be currently concentrated in the country's industry, but this could change, he said in a note on Thursday.

"Given the importance of industry for the entire economy, spillovers to other sectors – be it via sentiment or real economic channels – are already happening."

The crucial industry is also not set for a "substantial recovery" as issues with inventories and order books persist and tariffs on exports to the U.S. loom, Brzeski noted.

Thursday's figures compare to a 0.1% rise of the country's GDP in the third quarter of last year. Germany's economic performance has long been sluggish, with quarterly GDP readings mostly hovering around the flatline in the past two years. The economy has however managed to avoid a technical recession.

On an annual basis, the German economy contracted in both 2023 and 2024, by 0.3% and 0.2% respectively.

Some respite is expected in 2025, with the German government on Wednesday revealing its forecast of 0.3% growth for the