Stay informed with free updates

Just sign up to German economy myFT Digest — delivered directly to your inbox.

Germany’s economy will shrink for the second year in a row in 2024, underscoring the severity of the downturn facing Europe’s manufacturing powerhouse.

The Federal Statistics Office said on Wednesday that Europe’s largest economy contracted 0.2 percent last year, after a contraction of 0.3 percent in 2023. Economists had expected a 0.2 percent decline.

“Germany experienced the longest stagnation in its history after the war,” said Timo Wollmershäuser, economist at Ifo, a Munich-based economic think-tank, adding that the country had not fared well either. in an international comparison.

Confirm that Germany’s suffering one of the most protracted economic crises in decades comes six weeks ahead of a crucial snap election.

The campaign has been dominated by the specter of deindustrialisation, crumbling infrastructure and whether or not the country should let go of a debt brake that is holding back public spending.

Friedrich Merz, head of the center-right Christian Democratic Union who is likely to be Germany’s next chancellor, has campaigned on a reform agenda, promising to cut red tape and taxes and dial back welfare benefits for those person who does not work.

While private sector output contracted, government consumption increased by 2.6 percent compared to 2023.

Ruth Brand, president of the Federal Statistics Office, blamed “cyclical and structural pressures” for the poor performance, pointing to “increasing competition for Germany’s export industry, high energy costs, a level of interest rates remain high and an uncertain economic outlook.”

While the economy grew slightly in the first half of the year, it shifted into reverse gear from July. In the three months to December, output fell by 0.1 percent compared with the third quarter.

Robin Winkler, chief economist for Germany at Deutsche Bank, said the contraction in the fourth quarter came as a “surprise” and “concern”.

“If this is confirmed, the economy will lose more momentum by the end of the year,” he said, suggesting that it was likely driven by “political uncertainty in Berlin and Washington”.

The Bundesbank said last month that stagnation was set to continue this year, forecasting growth of just 0.1 percent and warning that a trade war with the US would trigger a year of economic contraction.

US president-elect Donald Trump has promised to impose blanket tariffs of up to 20 percent on all US imports.

Germany is struggling with an automotive industry crisis fueled by Chinese competition and an expensive switch to electric cars, along with high energy costs and strong consumer demand.

Manufacturing output contracted 3 percent, the statistics office said Wednesday, while corporate investment fell 2.8 percent.

Germany has effectively seen no meaningful economic growth since the start of the pandemic, with industrial production hovering more than 10 percent below its peak while unemployment has rebounded after falling. at record lows.