KfW-Konjunkturkompass

KfW Research

KfW Business Cycle Compass

The German economy is struggling to get any wind in its sails

The German economy is currently getting some lift from the monetary easing and higher real wages. Still, consumption remains subdued and investment is still muted. The threat of tariffs from the US is also clouding the outlook for exports. All in all, the sawtooth-shaped business cycle is likely to continue for the time being. KfW Research now expects GDP to fall again slightly by 0.2% this year. Real growth should pick up again moderately to 0.3% in 2026. Euro area GDP is likely to grow by 0.6% in 2025 and 0.8% in 2026. Inflation (HICP) will likely hit 2.2% in the euro area and 2.4% in Germany in 2025 as a result of persistent services inflation. It should fall to 2.0 and 2.2% in 2026.