Rudolph Angler Germany’s economy contracted for the second straight year in 2024, according to data from the Federal Statistics Office released on Wednesday.
The economy shrank by 0.2% last year, following a 0.3% decline in 2023, highlighting ongoing challenges for Europe’s largest economy.
“Initial calculations by the Federal Statistical Office (Destatis) show a 0.2% reduction in price-adjusted GDP compared to 2023. Calendar-adjusted figures also reflect this decline,” Destatis stated.
Speaking at a press conference in Berlin, Ruth Brand attributed the contraction to several cyclical and structural factors.
“These include increasing competition in export markets, persistently high energy costs, elevated interest rates, and an uncertain economic outlook,” Brand explained.
Declines in Manufacturing and Construction
Germany’s total gross value added fell by 0.4% in 2024 after adjusting for price effects, with notable declines in key sectors.
Manufacturing experienced a 3.0% drop in gross value added, significantly affecting industries like machinery, equipment, and automotive production. Energy-intensive sectors such as chemicals and metalworking also reported reduced output, continuing the downward trend from 2023 when energy costs spiked.
The construction industry faced even steeper challenges, with a 3.8% decrease in gross value added compared to the previous year. Elevated construction costs and interest rates curbed residential building activity, while output in building completion projects also declined.
However, infrastructure projects such as roads, railways, and pipelines saw increased activity, boosting the civil engineering sector.
In contrast, the service sector achieved modest growth (+0.8%) in 2024, though performance varied across industries. Retail and transport services reported gains, but motor vehicle trade, wholesale, and food services experienced declines.
The information and communication sector grew by 2.5%, and areas linked to public administration, education, and health services rose by 1.6%.
Economic Challenges Loom Ahead
This latest economic report comes as Germany prepares for an imminent snap election, with economic recovery dominating the agenda.
Ongoing issues such as stagnating growth, fiscal uncertainty, geopolitical risks, high energy costs, and a struggling automotive industry add to the country’s challenges. Without significant reforms to attract structural investment and enhance competitiveness, Germany risks enduring prolonged economic stagnation.