Germany Posts Modest Q1 Growth as Bundesbank Warns of Q2 Stagnation

Overview

• Official data from Destatis show real GDP rose 0.3% in the first quarter of 2026, with exports up 3.3% and government consumption rising while household spending was flat.
• Investment fell in Q1 as gross fixed capital formation dropped 1.5%, machinery and equipment fell 1.2%, and construction declined 2.5%, partly because bad winter weather delayed projects.
• The Bundesbank said the outlook has deteriorated because higher fuel costs and uncertainty from the war in Iran make it likely inflation will remain elevated and growth could stagnate in Q2.
• Preliminary April inflation was reported near 2.9% year‑on‑year, driven mainly by rising oil and gas prices that erode household purchasing power and weigh on company investment plans.
• If energy prices keep rising, Germany could see weaker household demand, further cuts to business investment, and spillovers to the wider EU economy that would slow recovery.