Germany Economy Grows 0.3% in Q1 2026 While Unemployment Surpasses 3 Million

Germany recorded stronger-than-expected economic growth in the first quarter of 2026, with GDP rising 0.3%, above forecasts of 0.2%. The expansion came despite elevated energy costs linked to geopolitical tensions involving Iran. Growth was mainly supported by household consumption and government spending, while exports also contributed positively.

Carsten Brzeski, global head of macro at ING, said the data shows the German economy is performing better than widely perceived, nearly a year after the current government took office. However, he cautioned against assuming this momentum will continue.

Unemployment Climbs Above 3 Million Mark

Despite economic growth, the labor market weakened. Seasonally adjusted unemployment rose above 3 million in April, with the labour office head noting there are no clear signs of a turnaround. This divergence highlights underlying structural challenges within the economy.

Political Pressure and Economic Challenges Intensify

US President Donald Trump criticized Germany’s leadership, stating that the chancellor should focus more on resolving the Russia-Ukraine war and fixing domestic issues such as immigration and energy, rather than interfering in efforts related to the Iran nuclear threat.

Economists warn that high energy prices and a lack of structural reforms could limit future growth. Additionally, fourth-quarter 2025 GDP was revised down to 0.2%, reinforcing concerns about the sustainability of Germany’s recovery.