With a gross domestic product of €4,470 billion in 2025, Germany remains the world's third-largest economy after the United States and China and just ahead of Japan, making it the largest economy in Europe. However, India is expected to overtake Japan and Germany in the future. Exports of motor vehicles and motor vehicle parts as well as chemical products in particular have made Germany the world's third-largest export nation. At 70%, the service sector contributes the largest share to the country's gross domestic product (GDP).
Data retrieved: 6 February 2026
Current insights in February 2026
- Economic growth
- Export
- Inflation
- Unemployment
- Insolvencies
Federal government lowers economic forecast
A noticeable economic upturn in Germany is still a long time coming. The federal government expects only slight economic growth of +1.0% this year. In the fall, gross domestic product was still expected to grow by +1.3%. In 2025, Germany narrowly avoided a third year without economic growth, with mini-growth of +0.2%, and is thus lagging behind other major industrialized nations.
According to the government, one reason for the gloomy expectations is that the recovery in the second half of 2025 was weaker than expected. This made for a more difficult start to the new year. In addition, the billions in government spending approved for infrastructure modernization, climate protection, and strengthening the armed forces are having a slower impact than hoped. Debt-financed special funds are expected to be a key driver of economic growth. According to the government, government investment is likely to contribute around two-thirds of a percentage point to GDP growth in 2026.
The mood among companies in Germany has also remained unchanged. The ifo Business Climate Index remained at 87.6 points in January 2026. While the current situation was assessed somewhat more positively, expectations clouded over slightly.
The public expenditure ratio, which indicates the state's influence on an economy, is calculated as total government expenditure as a percentage of GDP. According to the EU Commission, this amounted to 50.2% in Germany in 2025, representing a further increase of 0.7 percentage points compared with 2024. This put the public spending ratio slightly above the EU average of 49.6%, but significantly above the public spending ratios of other major economies such as the United Kingdom (46.9%), Japan (41.3%), and the United States (39.6%).
According to the OECD, the share of taxes and social security contributions in total labor costs for average earners in Germany was 47.9% in 2024 for singles without children. This puts Germany in second-worst place among the 38 OECD member states, behind Belgium, and well above the OECD average of 34.9%, which detracts from Germany's attractiveness as an investment locati . The ratio is also significantly lower in countries outside the EU, such as the United Kingdom (29.4%) and the United States (30.1%).
The current forecasts by German economic research institutes and government organizations for GDP growth in Germany range between +0.6% and +1.5% for the calendar year 2026 and between +1.0% and +1.6% for 2027:
Data retrieved: 6 February 2026
German exports rise sharply in December 2025
For German exporters, 2025, a year marked by higher US tariffs and increasing competition from China, ended on a positive note in the last month of the year. Their exports grew by +4.0% in December 2025 compared to the previous month, reaching €133.3 billion. This is the largest increase since October 2021. Compared to the same month in the previous year, December 2024, they also rose by +2.7%.
Conversely, goods worth €116.2 billion were imported – an increase of +1.4% compared to the previous month of November 2025. The foreign trade balance thus closed with a surplus of €17.1 billion.
In 2025 as a whole, Germany exported goods worth €1,562.9 billion and imported goods worth €1,362.5 billion, adjusted for calendar and seasonal effects. This means that exports rose by +0.9% and imports by a significantly higher +4.3% compared with 2024. The foreign trade balance closed 2025 with an export surplus of €202.8 billion. In 2024, the balance had been €244.9 billion. The most important trading partner was China with foreign trade turnover of €253.0 billion (previous year: €247.3 billion), followed by the USA with turnover of €241.6 billion (previous year: €254.0 billion). German foreign trade turnover with the EU amounted to €1,579.6 billion in 2025, which is approximately three times as high as with the US and China combined. Germany's largest trading partners within the EU in 2025 were the Netherlands (€210.1 billion), France (€187.1 billion), and Poland (€181.0 billion).
Real (price-adjusted) order intake in the manufacturing sector rose by +7.8% in December 2025 compared with November 2025, adjusted for seasonal and calendar effects. Excluding large orders, order intake was +0.9% higher than in the previous month. In the less volatile three-month comparison, orders received in the fourth quarter of 2025 were up +9.5% compared with the third quarter.
In contrast, real (price-adjusted) production in the manufacturing sector fell by 1.9% in December 2025 compared with November 2025, after seasonal and calendar adjustment. In the less volatile three-month comparison, production in the fourth quarter of 2025 was 0.9% higher than in the third quarter.
Inflation falls significantly in December 2025
Inflation rose more sharply than expected in Germany in January 2026. Consumer prices in January were +2.1% above the level of the same month last year, following +1.8% inflation in December.
The biggest price driver in January 2026 remained services, which rose by an above-average +3.2%. This reflects the increase in the price of the Germany ticket for nationwide travel on regional and local transport. People had to pay +2.1% more for food in January than a year earlier. According to data from the federal states, coffee, chocolate, and meat in particular were significantly more expensive than a year earlier, as were fruit and vegetables.
Core inflation, which is particularly closely watched by economists and excludes volatile food and energy prices, rose from +2.4% in December 2025 to +2.5% in January 2026.
For 2026, economic research institutes are forecasting an average inflation rate of +1.8 to +2.2%.
Data retrieved: 6 February 2026
Unemployment rises to over three million
In January 2026, more than three million people in Germany were unemployed. Compared to December 2025, their number rose by 177,000 to 3.085 million. This is the highest January figure since 2014. The unemployment rate rose by 0.4 points compared to the previous month to 6.6%.
Unemployment regularly rises in January for seasonal reasons. At the end of the year, many fixed-term employment contracts expire and weather-dependent industries such as construction, agriculture, and tourism reduce their employment levels. The outlook for the unemployed is not good at present. There is little momentum in the labor market. The number of vacancies registered with employment agencies fell to 598,000 – 34,000 fewer than a year ago.
Number of corporate insolvencies rises to ten-year high
The structural problems of the German economy are clearly reflected in a dynamic insolvency situation. According to the annual analysis "Insolvencies in Germany 2025" by Creditreform Wirtschaftsforschung, the number of corporate insolvencies rose by +8.3% to 23,900 cases – the highest level since 2014. Although the increase was lower than in previous years (2023: +22.9%, 2024: +22.5%), there were still over 9,000 more cases than in 2022.
By far the most affected were micro-enterprises with up to ten employees. According to Creditreform, there were around 19,500 insolvencies in this segment – an increase of 8.9% over the previous year. This means that 81.6% of all insolvencies were accounted for by this group. Particularly strong increases in insolvencies were seen in the manufacturing and retail sectors, where cases rose by more than ten percent in each case.
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Andreas Glunz
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KPMG AG Wirtschaftsprüfungsgesellschaft
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