Germany's Federal Statistical Office reported that German gross domestic product in the second quarter of 2026 expanded 0.3% quarter-on-quarter, above the preliminary estimate of 0.2%, supported by a recovery in exports, wholesale and retail trade. This is in line with investor confidence indicators and private-sector results that improved more than expected, reinforcing signs of recovery in the German economy after a prolonged slump. The positive economic data is an important advantage for Friedrich Merz, the German chancellor, who is facing heavy pressure from sliding approval ratings ahead of state elections in September, in which the far-right Alternative for Germany party is likely to win and take executive power. Although Germany's economic recovery had previously stumbled because of surging energy prices stemming from the Iran war, prompting the economy ministry to cut its full-year 2026 growth forecast to 0.5% from 1.0%, positive momentum has recently become clearer as German manufacturers in energy-intensive industries are regaining a competitive edge over Asian rivals that have been hit harder by the war.
