Germany: Q4 GDP Indicates Rising Momentum for Next Quarters

Q4 GDP rose 0.3% QoQ after no growth in Q3, delivering a more robust performance. All components of domestic demand contributed positively to growth in Q4 except stocks, with Public Consumption making the largest contribution. In contrast, n et exports dampened growth, as both exports and imports fell in Q4. Gross Value Added (GVA) increased by 0.4% QoQ after 0% in Q3. All sectors registered positive or flat growth (except Agriculture). Manufacturing stayed flat, Construction rose 1.7% QoQ, and Public Services grew by 0.8% QoQ. A key factor behind the stronger-than-expected results is the revision of the general government deficit, revised to 2.7% of GDP in 2025 from 2.4% in the first release (Natixis had forecast 2.8% before the preliminar y estimates ), amounting to €119.1bn versus €107.4bn in the preliminary figures. Most of the revision stems from changes at the federal level. Compared with 2024, the German deficit remained flat. Overall, the Q4 results and the higher deficit are consistent with our view of a rapid acceleration in the German fiscal plan . W e expect the latter to add up to 1.1 pp to GDP growth in 2026, with part of this boost already occurring in Q1 and Q2 . Moreover, the anticipated front-loading of consumer spending ahead of the 8.5% minimum wage failed to materialise in Q4 2025 . Taking these factors into account reinforces our view of a stronger GDP growth in Q1 and Q2 than in Q4 of 2025 , at 0.5% and 0.4% QoQ respectively. This contrasts with Bloomberg Consensus, which expects growth at 0.2% in Q1 and 0.3% in Q2.