Germany's Economic Outlook: A Modest Recovery

The German economy shows signs of a modest recovery, with a 0.2 percent increase in gross domestic product (GDP) in the first quarter of 2025. This growth is the first in over two years, indicating a potential turning point, particularly buoyed by activity in the construction sector.

Despite this positive news, the annual performance reflects a decline of 0.7 percent compared to the previous year. The labor market has experienced a slight uplift, with unemployment dipping to 6.3 percent in April, a decrease of 0.1 percentage points.

However, this improvement remains modest when viewed against historical data. The trend in short-term work has stabilized, with 244,000 employees engaged in this program as of February 2025, showing a slight decline from January figures.

While demand for labor is still high, it appears to be tapering off. In the realm of apprenticeships, the situation remains uncertain, with 354,000 candidates registered since October 2024, a rise of 12,000 from the same period last year.

Retail sales in March showed a slight decline compared to February, although a year-over-year comparison indicated a growth of 2.2 percent. Overall, while positive indicators emerge, the broader economic landscape suggests cautious optimism as Germany navigates its recovery.