With a gross domestic product of 4,470 billion euros in 2025, Germany remains the world’s third-largest economy—behind the United States and China and just ahead of Japan—and is thus also Europe’s largest economy. Exports of motor vehicles and automotive parts, as well as chemical products, in particular, make Germany the world’s third-largest exporting nation. At 70%, the service sector accounts for the largest share of the country’s gross domestic product (GDP). With a share of around 26%, industry in Germany makes a comparatively high contribution to economic output. In other European countries such as France or the United Kingdom, as well as in the U.S., this figure is about 17%, whereas in China it is around 38%.
Data retrieved: 7 August
Current insights in August 2026
- Economic growth
- Export
- Inflation
- Unemployment
- Swimming pool admission fee
German economy saw minimal growth in the second quarter of 2026
The German economy grew in the spring. From April to June, gross domestic product rose by 0.2% compared to the previous quarter.
Most recently, all the latest economic indicators had already pointed upward. Industrial orders, production, exports, building permits, and retail sales all picked up. In the industrial sector, order books are now fuller than at any time since records began in 2015. The order backlog, at 8.9 months, is also at a record high.
However, major risks remain. For example, the conflict with Iran has flared up again in recent days, temporarily driving the price of oil above the $100-per-barrel mark. The economy is therefore likely to continue suffering from high energy prices in the second half of the year. Added to this are high U.S. tariffs and increasing competition from China, for example in the automotive and machinery sectors. According to experts, low water levels on the Rhine could also weigh on German economic performance.
Business sentiment in Germany improved again in July. The ifo Business Climate Index rose to 86.6 points, up from 85.7 in June. This was due to significantly improved expectations; however, companies were somewhat less satisfied with their current business activity.
The public expenditure ratio, which indicates the government’s influence on a national economy, is calculated as total government spending as a percentage of GDP. According to the European Commission, this ratio stood at 50.2% in Germany in 2025, marking a further increase of +0.7 percentage points compared to 2024. This placed Germany’s public expenditure ratio slightly above the EU average of 49.6%, but significantly above that of other major economies, such as the United Kingdom (46.9%), Japan (41.3%), and the United States (39.6%).
According to the OECD, income tax plus employee and employer social security contributions for a single worker with an average income amounted to 49.3% in Germany in 2025. This means that, among all 38 OECD member states, Germany has the second-highest tax and contribution rate after Belgium and is significantly above the OECD average of 35.1%, which significantly undermines Germany’s attractiveness as an investment location. The rate is also considerably lower in countries outside the EU, such as the United Kingdom (32.4%) or the United States (30.0%).
The latest forecasts from German economic research institutes and government organizations regarding GDP growth in Germany range from +0.4% to +0.9% for the calendar year 2026 and from +0.8% to +1.4% for 2027:
Data retrieved: 7 August
German exports reach record high in June
Despite the strain caused by the war in Iran, German exports rose to a record high in June. Never before have so many goods been exported in a single month—on a calendar- and seasonally-adjusted basis—as in June 2026. In total, goods worth 139.3 billion euros were shipped abroad. That was 0.9% more than in May and 6.6% more than a year earlier. Exports have thus increased for the fifth consecutive month and have proven to be a pillar of support for the faltering German economy.
Imports grew even more strongly than exports, rising by 4.4% since May to 123.9 billion euros. Compared to the same month a year earlier, they were up 8.4%.
Sentiment in the German export sector has improved only slightly. The ifo Barometer for export expectations rose to -3.3 points in July 2026, up from -3.6 points in June.
Real (price-adjusted) order intake in the manufacturing sector rose by 3.1% in June 2026 compared with May 2026, after seasonal and calendar adjustment. Excluding large orders, order intake was 0.5% lower than in the previous month. In the less volatile three-month comparison, order intake from April through June 2026 was 1.3% higher than in the previous three months.
Real (price-adjusted) production in the manufacturing sector rose by 0.2% in June 2026 compared with May 2026, after seasonal and calendar adjustment. In the less volatile three-month comparison, production from April through June 2026 was 0.7% higher than in the previous three months.
Inflation rises to 2.8% in July
Following the expiration of the fuel tax rebate, inflation in Germany has surged. In July, consumer prices were 2.8% higher than in the same month of the previous year.
In May and June, the reduction in the energy tax on gasoline and diesel by just under 17 cents per liter had tempered price increases. The inflation rate fell to 2.3% in June. As recently as April, the oil price shock resulting from the war in Iran had driven the inflation rate to 2.9%, its highest level since January 2024.
The ongoing war in Iran continues to weigh on energy markets: At one point, the oil price once again exceeded the $100 per barrel mark, but then fell back. Because many producers are gradually passing on higher energy costs to their prices, food, for example, could become even more expensive in the coming months.
Economic research institutes are currently forecasting an average inflation rate of +2.6% to +3.1% for 2026 and inflation of +2.0% to +3.0% for 2027:
Data retrieved: 7 August 2026
Unemployment rises above three million in July
The number of unemployed people in Germany rose by 71,000 in July compared to the previous month, surpassing the three-million mark at 3.007 million. This figure is 28,000 higher than in July 2025. The unemployment rate rose by 0.2 percentage points compared to the previous month, reaching 6.4%. 1.108 million people received unemployment benefits in July. That is 107,000 more than a year earlier.
Unemployment and underemployment increase noticeably in July, primarily for seasonal reasons, according to the Federal Employment Agency. Overall, however, the weak trend of recent months continues in the labor market.
Swimming pool visits in June 2026 were 3.6% more expensive than a year earlier
In the summer heat, many people seek relief at the swimming pool. Compared to the previous year, however, a visit has become more expensive: In June 2026, a visit to a swimming pool cost 3.6% more than a year earlier. By comparison, overall consumer prices rose by 2.3% during the same period.
In addition to the admission ticket for an outdoor or indoor pool, a day at the pool also requires certain equipment—lower prices were observed for selected items compared with the same month a year earlier: For example, beach umbrellas most recently cost 0.7% less than in June 2025. Women’s sports and swimwear was 1.1% cheaper in June 2026 than a year earlier, while men’s sports and swimwear cost 1.7% less.
A survey of 400 CFOs from the largest international companies in Germany—based in the most important investor countries—reveals a continuing downward trend in key location factors, but also highlights the country’s strengths as a business location and new business areas. As part of our study “Business Destination Germany 2026,” we analyze the data and identify the most important areas for action.
You can find our key study findings, analyses, and recommendations for strategic adjustments focused on geopolitics, artificial intelligence, and sustainability in our white paper *From Fragmentation to Trusted Growth: What Matters for Leaders in 2026*.
The KPMG Global Navigator offers insights into global growth prospects, opportunities, and challenges.
Our CEO Outlook 2025, for which we surveyed 1,350 CEOs of large companies worldwide—including 125 CEOs in Germany—also provides assessments of the economic situation, generative AI, ESG, and other current topics.
Our Future Readiness Monitor 2025, for which 570 top decision-makers in the German business community were surveyed, also provides an assessment of German companies’ future readiness in light of new opportunities and complex challenges, as well as their investment plans and views on trends for the coming years.
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