Germany’s economy has contracted for the second year in a row

Get free updates

Register easily German economy myFT Digest — delivered straight to your inbox.

In the year Germany’s economy contracted for the second year in a row in 2024, underscoring the seriousness of the decline in Europe’s manufacturing powerhouse.

The Federal Statistics Office said on Wednesday that Europe’s largest economy shrank 0.2 percent last year and 0.3 percent in 2023. Economists had expected a 0.2 percent decline.

“Germany is experiencing the longest recession in its post-war history,” said Timo Wollmershauser, an economist at the Munich-based economic think tank Ifo, adding that the country has also performed well in international comparisons.

Make sure it is Germany It is six weeks before a crucial snap election in one of the most protracted economic crises in decades.

The campaign has become dominated by deindustrialization, infrastructure development and the country’s need to get rid of the debt burden that limits public spending.

Friedrich Merz, the leader of the centre-right Christian Democratic Union, is touting a reform agenda as the next chancellor of Germany, promising to cut red tape and taxes and call back welfare benefits for the unemployed.

As private sector output declines, government consumption rises by 2.6 percent compared to 2023.

Ruth Brand, president of the Federal Statistical Office, blamed “cyclical and structural pressures” for the weak performance, including “increasing competition for Germany’s export industry, high energy costs, interest rates that remain high and an uncertain economic outlook.”

In the three months to December, it was down 0.1 percent from the third quarter.

Robin Winkler, Germany’s chief economist at Deutsche Bank, said the contract in the fourth quarter was “shocking” and “worrisome”.

“If this is confirmed, the economy would have lost more momentum by the end of the year,” he said, suggesting that this may be due to political instability in Berlin and Washington.

The Bundesbank said last month that it would continue to slow down this year, forecasting growth of just 0.1 percent and warned that the trade war with the US would lead to another year of recession.

US President-elect Donald Trump has promised to impose tariffs of up to 20 percent on all US goods.

Germany is struggling with a crisis in its automotive industry fueled by Chinese competition and a shift to electric cars, high energy costs and tight consumer demand.

Manufacturing output contracted by 3 percent, the statistics office said on Wednesday, while corporate investment fell by 2.8 percent.

Germany has seen no meaningful economic growth since the start of the pandemic, with industrial production hovering above 10 percent of its peak, while unemployment has begun to grow again after falling to record lows.