German economy contracts for second consecutive year
By Abigail Townsend
Date: Wednesday 15 Jan 2025
(Sharecast News) - The Germany economy shrank for the second year in a row in 2024, official data showed on Wednesday, weighed down by weakness across both manufacturing and construction.
According to first estimates from Destatis, Germany's Federal Statistical Office, GDP contracted by 0.2% year-on-year in 2024. That compares to a 0.3% decline in 2023.
Within that, gross value added in the manufacturing sector slid 3.0%, and by 3.8% in construction.
Europe's largest economy - which is heavily reliant on manufacturing - has been hit hard by soaring energy prices, sticky inflation and higher interest rates.
Key manufacturing sectors, including Germany's flagship automotive industry, saw a "marked" decline in production in 2024, Destatis said.
Production also remained at a low level in energy-intensive industrial branches like chemical and metal working.
The construction sector, meanwhile, was hit hard by higher interest rates, with meant fewer residential buildings were built during the year.
Destatis president Ruth Brand said: "Cyclical and structural pressures stood in the way of better economic development in 2024.
"These include increasing competition for the German export industry on key sales market, high energy costs, an interest rate level that remains high and an uncertain economic outlook. Against this backdrop, the Germany economy contracted once again in 2024."
GDP in the fourth quarter was estimated to have fallen by 0.1% once adjusted for price, seasonal and calendar variations. However, Destatis cautioned that the quarter-on-quarter print was a "first, very early" estimate with a high degree of uncertainty.
The estimates for 2024 and the fourth quarter were calculated without hard data for December.
Carsten Brzeski, global head of macro at ING, said: "It's the first time since the early 2000s that the German economy contracted for two years in a row. And yes, the early 2000s were the last time Germany received the very flattering title of 'sick man of Europe'. History doesn't repeat, but it rhymes.
"The old macro business model of cheap energy and easily accessibly large export markets is no longer working. Ten years of underinvesting, deteriorating competitiveness and China's shift from export destination to fierce industrial competitor have taken - and will continue to take - their toll on the Germany economy."
"Looking ahead, besides some rather technical rebounds, a substantial recovery of German industry is not in sight just yet."
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