Overall, from today’s perspective, real gross domestic product (GDP) could increase slightly in the third quarter of 2025, the Bundesbank writes in its Monthly Report. Despite continued unfavourable investment conditions for firms and additional burdens caused by the new US tariffs, there were no signs of any major setbacks for industry. It got off to a surprisingly strong start in the third quarter. The output growth extended across all categories of goods, with capital goods producers, and in particular mechanical engineering and the automotive industry, standing out. The special developments in these two sectors suggest that output was only significantly higher in July. The economists also write that although the underlying trend dynamics of demand for German industrial goods are still pointing upwards, the lack of orders remains a challenge. According to the ifo Institute, just under 40 % of enterprises continue to suffer from weak orders. 

According to the Monthly Report, construction output remained at a low level in July. The economists are not expecting a recovery in the short term. Although demand for housing construction is tilted to the upside, it remains at a low level and is not sufficient to stimulate output. By contrast, capacity utilisation in civil engineering is rising. Private consumption is likely to improve slightly, if at all.

Labour market not providing any strong stimulus at present

In July, as in the previous month, just under 46 million persons were in employment in Germany. The relatively constant level of employment for what has now been two years obscures the enormous shifts between economic sectors, the economists write. According to initial estimates by the Federal Employment Agency, the number of jobs in industry declined further in June. The manufacturing sector recently saw somewhat fewer job losses. A significant number of jobs had been cut here in the automotive industry at the beginning of 2025, in particular. By contrast, employment in services sectors such as health and social services, business-related services and the logistics sector rose. According to the Monthly Report, markedly less use was made of short-time work for economic reasons than at the beginning of the year. The available indicators suggest there will be little change in employment in the short term. 

Seasonally adjusted unemployment fell for the first time since 2022. 2.96 million persons were registered as unemployed in August, which was 9,000 fewer than in the previous month. The unemployment rate remained unchanged at 6.3 % due to rounding.

Inflation rate picked up in August

The Harmonised Index of Consumer Prices (HICP) rose again by a seasonally adjusted 0.2 % in August compared with the previous month. Food products, in particular, saw another marked price increase and services prices were also distinctly higher again, according to the economists. Energy prices dropped again somewhat. The annual inflation rate increased from 1.8 % in July to 2.1 % in August. The Bundesbank expects it to fluctuate slightly above the 2 % mark up until the end of the year.