Germany's Q1 GDP grows by 0.3%, exports rebound significantly

The German economy recorded a 0.3% quarter-on-quarter growth in the first quarter of this year, with a significant increase in exports and expanded government spending supporting the base, offsetting the drag from flat consumption and declining investments.

However, this growth rate seems more like a last gasp before the war impact - the high energy prices and demand contraction caused by the blockade of the Strait of Hormuz are eroding the growth foundation for subsequent quarters.

The head of Germany's Federal Statistical Office, Ruth Brand, said that the significant rebound in exports in the first quarter was a core factor driving economic performance. It is noteworthy that imports increased very little during the same period, which to some extent artificially magnified the net contribution of trade to GDP and created a gap with the difficulties shown in recent export data. Data released this week showed that German exports to the US have significantly declined compared to the same period last year.

This report provided Chancellor Friedrich Merz with a brief political buffer.

The German economy has not seen substantial growth for three consecutive years, with internal disputes within the government and a slow implementation of comprehensive reforms. The Ministry of Economics has revised down the annual growth forecast for 2026 from 1% to just 0.5%.

The second quarter situation may be even more severe. The Bundesbank expects the economy to stagnate in that quarter, while S&P Global's May monthly business survey showed the possibility of further economic contraction after economic activities shrank for two consecutive months.