Germany's Q2 economic growth beats initial estimate in latest sign of momentum

Further evidence of an economic turnaround would be positive for Chancellor Friedrich Merz, who has been sliding in opinion polls and who faces state elections next month that could propel the far-right AfD to power at regional level.

Higher oil and natural gas prices as a result of the Iran war had hampered a long-awaited recovery in Europe's largest economy. The economy ministry in April slashed its 2026 growth forecast to 0.5% from a previous estimate of 1%.

Recent economic data have been stronger than expected and increased government spending from the €500 billion ($583 billion) infrastructure fund should support a rebound in growth.

Surveys improved markedly in the early third quarter, especially in manufacturing, said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics. But downside risks still loom from very low water levels on the Rhine at the end of the second quarter — which could weigh on output with a lag — and into early third quarter, he said.