German economy grows by 0.2% in second quarter, beating expectations

BERLIN, July 30 (Reuters) - Germany's gross domestic product grew more than expected in the second quarter despite rising prices due to the Iran conflict.

Gross domestic product expanded by 0.2% compared with the previous three-month period, preliminary data from the statistics office showed on Thursday. Analysts polled by Reuters had forecast a rise of 0.1%.

Separate data showed that GDP grew by 0.2% in France and Italy and by 0.7% in Spain, suggesting activity in the euro zone held up well in the second quarter.

The German economy grew by a revised 0.4% in the first quarter, up from the 0.3% previously announced. It has been expanding modestly for the last three quarters, following two quarters of stagnation in 2025.

At the start of July, Chancellor Friedrich Merz outlined a package of pension, tax and labour reforms to boost growth, jobs and competitiveness after years of meagre economic growth.

Economists say the reforms could lift Germany's sluggish growth rate, and German business morale improved more than expected in July, reflecting hopes for the reform package.

The improvement in the Ifo economic institute's business climate index points to the recovery continuing in the second half of the year, Ifo economic chief Timo Wollmershaeuser said.

"Some industrial sectors benefited from the fact that Asian competitors were hit harder by the closure of the Strait of Hormuz," said Carsten Brzeski, global head of macro at ING.

Exports were up compared with the previous quarter, driving the increase, the statistics office said.