BERLIN, July 30 (Xinhua) -- Germany's economy contracted slightly in the second quarter, partially reversing the modest rebound seen earlier this year, as pressure from recent U.S. tariffs weighed on exports and broader economic activity.
Preliminary data released Wednesday by the Federal Statistical Office (Destatis) showed that Germany's gross domestic product (GDP) fell by 0.1 percent quarter-on-quarter, following a 0.3 percent expansion in the first quarter. The figure was broadly in line with economists' expectations.
"The German economy is losing momentum after a positive start to the year," the statistics agency said in a statement.
While both private and government consumption increased, Destatis noted a decline in investment in machinery, equipment, and construction, contributing to the overall downturn.
The contraction echoed earlier warnings from leading economic think tanks. The ifo Institute, based in Munich, had projected a slowdown in the second quarter, attributing it in part to the impact of U.S. trade policies on Germany's export-reliant economy.
Despite the downturn, analysts say the recovery is not yet derailed. Geraldine Dany-Knedlik, head of economic forecasting at the German Institute for Economic Research (DIW), pointed to encouraging signs in industrial production and business sentiment indicators, bolstered in part by domestic fiscal stimulus.
The latest ifo Business Climate Index reflected growing optimism, with business confidence rising for a seventh consecutive month in June to reach its highest level in over a year. While firms expressed a more positive assessment of current conditions, their forward-looking expectations remained cautious amid ongoing global trade uncertainties.
Over the weekend, U.S. President Donald Trump and European Commission President Ursula von der Leyen announced a new transatlantic trade agreement. However, the announcement was met with skepticism in Germany. Dany-Knedlik warned that "no tariff relief is expected from the deal," and suggested that "on the contrary, burdens on the German economy could increase."
Carsten Brzeski, global head of macroeconomic research at ING, said the second quarter marked the first full impact of U.S. tariffs on the German economy. He cautioned that the downward trend could persist into the third quarter, estimating that a 15 percent U.S. tariff rate might shave 0.1 to 0.2 percentage points off Germany's GDP growth. ■