Germany’s economy shrinks as inflation lingers and recession fears grow

A shrinking GDP and stubborn inflation put Germany on shaky ground. Investors watch nervously as the Eurozone’s anchor economy teeters on the edge of recession.

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2025 November 22 . 8:51 PM

1 min read

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Germany’s economy shrinks as inflation lingers and recession fears grow

Germany’s economy is facing fresh challenges as new data reveals a contraction in growth and persistent inflation. The country’s GDP shrank by 0.1 percent in the second quarter, raising concerns about a possible recession. Meanwhile, inflation stayed high at 2.3 percent in July, despite a minor dip the previous month.

Germany’s economic slowdown has been driven by weak investment and a sharp decline in construction activity. The contraction in GDP follows a period of stagnation, and analysts warn that another negative quarter could push the country into recession. The Eurozone, heavily influenced by Germany’s performance, managed only 0.3 percent growth in the same period.

Germany’s economic outlook remains uncertain, with weak growth and inflation still above target. The stock market’s mixed performance highlights investor caution ahead of major US earnings reports and the Fed’s rate decision. These factors will likely determine short-term market direction and economic confidence.