By Maria Martinez
BERLIN, Aug 25 (Reuters) - The German economy grew more strongly in the second quarter than initially indicated, data showed on Tuesday, adding to signs of a long-awaited turnaround.
Gross domestic product grew by 0.3% in the second quarter from the previous quarter, slightly above last month's preliminary reading of 0.2% as exports perked up.
The data follows a stronger-than-expected rise in investor morale last week, as well as improved quarterly company earnings, stronger exports
and industrial production that beat expectations in June.
A NASCENT RECOVERY
"The German economy is maintaining the growth momentum seen at the start of the year", said Ruth Brand, president of the statistics office.
Germany's GDP expanded by 0.4% in the first quarter, and has grown modestly for three consecutive quarters after two quarters of stagnation in 2025.
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%.
As in the first quarter, growth was primarily driven by exports, which rose 2.0% quarter-on-quarter.
"Details released today show that the noticeable economic recovery observed since the end of last year is primarily attributable to stronger foreign demand," said Ralph Solveen, senior economist at Commerzbank. Higher government spending played a rather minor role, particularly in the first half of this year, he added.
Household consumption was subdued, expanding by a modest 0.1%, while investment declined by 0.2% compared with the previous quarter.
A MIXED OUTLOOK
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.
Analysts also cautioned that the geopolitical situation remains very uncertain due to the war in Iran.
"Even though a slight setback looms in the third quarter due to high energy prices and the drought, today’s figures suggest slight upside risks to our forecast that the German economy will grow by 1% this year," said Solveen.
(Reporting by Ludwig Burger and Maria Martinez; editing by Friederike Heine, Louise Heavens and Conor Humphries)
