German Economy Beats Expectations in Q1 on Pre-Tariff Export Surge, but Momentum Seen as Temporary

Germany’s economy grew more than initially estimated in the first quarter of 2025, buoyed by a sharp rise in exports and industrial activity as firms rushed to ship goods ahead of looming U.S. tariffs, according to revised data released Friday by the federal statistics office.

Gross domestic product (GDP) expanded by 0.4% quarter-on-quarter, doubling the preliminary estimate of 0.2%. The figures mark a rebound after Germany contracted by 0.2% in the final quarter of 2024, which had reignited fears of a recession.

The strong performance puts Europe’s largest economy ahead of the eurozone average, which grew by 0.3% in the same period.

Exports and Industry Drive the Surprise Upside

“Manufacturing output and exports registered stronger growth than initially assumed in March,” said Ruth Brand, president of the statistics office, attributing the revision largely to frontloaded shipments by U.S. importers anticipating new tariff measures.

Exports jumped 3.2% compared to the previous quarter, while household consumption rose 0.5%, adding to the upward momentum. Meanwhile, investment rose 0.9%, indicating broader business confidence.

However, government spending declined by 0.3%, held back by Germany’s ongoing provisional budget following the collapse of former Chancellor Olaf Scholz’s coalition late last year.

Structural Headwinds Still Loom

Despite the stronger start to the year, the broader picture remains fragile. The provisional budget is expected to constrain public sector activity, while geopolitical uncertainties—particularly regarding U.S. trade policy—continue to cast a shadow.

Nevertheless, the first-quarter data offer a rare bright spot for a country that has struggled with stagnation and industrial headwinds since late 2022. Whether this momentum carries through the rest of 2025 will depend heavily on trade developments, industrial dynamics, and fiscal clarity from Berlin.