German economy shrank more than expected at end of 2024

Germany's economy shrank more than expected at the end of 2024, official data showed Thursday, the latest bad news for Europe's traditional powerhouse which is battling myriad headwinds.

Output in the eurozone's biggest economy fell 0.2 per cent in the fourth quarter compared to the previous quarter, according to preliminary figures from federal statistics agency Destatis.

Analysts polled by data firm FactSet had expected a contraction of 0.1 per cent.

Destatis also confirmed that output shrank 0.2 per cent across the whole of 2024, in line with its earlier estimate, and marking the second straight year of contraction for the German economy.

Germany has been suffering due to high energy costs, a manufacturing slowdown and weak demand for the country's exports, combined with a host of structural issues such as labour shortages.

In the final quarter, while domestic spending helped support growth, it was not enough to offset falling exports, Destatis said.

Analyst Carsten Brzeski from bank ING said the figures underlined the scale of the challenge for Germany.

"2024 was the year when cyclical and structural headwinds became a storm," he said.

"A substantial recovery of German industry is not in sight just yet," he added, pointing to empty order books as well as the threat of US President Donald Trump imposing tariffs.

Thursday's bleak data came a day after the government said it expected the German economy to grow just 0.3 per cent in 2025, down from a previous forecast of 1.1 per cent.

France, the eurozone's second-biggest economy after Germany, also performed worse than expected in the fourth quarter as data showed its economy contracted by 0.1 per cent.