German economy grew in latest quarter, but challenges remain

"Germany's economy grew more than expected in the fourth quarter of 2025, according to official figures released on Friday. German gross domestic product was up 0.3%, beating the consensus forecast growth of 0.2%. But increases in inflation and unemployment underscored the challenges that confront Europe's largest economy."

"Inflation edged up slightly in January, returning above the European Central Bank's 2% target to 2.1% year-on-year. Inflation was particularly high in the states of North Rhine-Westphalia (NRW), Baden-Wurttemberg, Bavaria, Saxony and Lower Saxony, reaching as high as 2.3% in some regions."

"Unemployment also increased by 177,000 to 3.08 million in January, with the rate having jumped by 0.4 percentage points to 6.6% in seasonally unadjusted terms. According to monthly statistics released by the Federal Employment Agency (Bundesagentur fur Arbeit, or BA), 92,000 more people were unemployed in January 2026 than at the same time last year. "The rise in the number of unemployed to more than three million is an alarm signal," German Chancellor Friedrich Merz wrote on social media. "The economic upturn must be this year's central priority." But BA chairwoman Andrea Nahles said there was "currently little dynamism in the labor market," writing that an increase in unemployment is common at this time of year. "Unemployment has increased for the usual start-of-year reasons, pushing us over the three-million mark," she said."

German gross domestic product increased 0.3% in the fourth quarter of 2025, exceeding the 0.2% consensus forecast. Inflation rose to 2.1% year-on-year in January, above the European Central Bank's 2% target, with regional peaks up to 2.3%. Services drove inflation higher, led by public transport, while food prices rose 2.1% with notable increases in fruit, vegetables, coffee, and meat. Energy prices fell 1.7% year-on-year. Unemployment climbed by 177,000 to 3.08 million in January, raising the unadjusted rate to 6.6%, and prompting calls to prioritize the economic upturn amid weak labor market dynamism.

Read at www.dw.com