German economy picks up pace even as unemployment spikes

"Europe's largest economy grew more than expected at the end of last year, but this is likely not cause for celebration among three million unemployed workers in Germany as major companies continue with widespread job cuts. The German economy grew faster than expected at the end of 2025, official data showed Friday, suggesting that a recovery is gathering pace in Europe's struggling industrial powerhouse."

"Economic output expanded 0.3 percent in the final quarter of last year, according to the statistics agency Destatis. A first estimate from the agency in mid-January had put the growth figure at 0.2 percent. "The German economy ended 2025 in positive territory after a turbulent year, particularly for foreign trade," said the agency, noting that higher government and consumer spending had boosted growth."

"Chancellor Friedrich Merz last year announced vast extra public spending on defence and infrastructure, and analysts say its effects are now starting to feed through to the wider economy. Addressing parliament Friday, Economy Minister Katherina Reiche said that "we are seeing light at the end of the tunnel again", noting that the government expected growth of one percent this year and 1.3 percent in 2027. "That is not yet an economic boom, but it is a start and the signs are encouraging," she said."

Germany's economy grew 0.3 percent in the final quarter of 2025, exceeding an earlier 0.2 percent estimate and signaling a modest recovery. GDP for 2025 was estimated at 0.2 percent, marking a return to growth after two years of recession. Unemployment rose above three million in January, with nearly 3,085,000 people registered as jobless, reflecting persistent labour-market weakness and ongoing corporate layoffs. Higher government and consumer spending, including increased defence and infrastructure outlays, helped boost output. Manufacturing weakness, high energy costs, weak external demand and US tariffs continue to weigh on the economy. The government expects 1.0 percent growth in 2026 and 1.3 percent in 2027.

Read at The Local Germany