According to preliminary calculations by the Federal Statistical Office (Destatis), Germany’s gross domestic product adjusted for prices was 0.2 percent lower in 2024 than in the previous year. Although Poles are buying more products from the German automotive industry, this has not made up for the losses from China.
“Economic and structural burdens stood in the way of improved economic development in 2024,” Ruth Brand, CEO of Destatis, told a press conference in Berlin.
“These include growing competition for the German export industry in important sales markets, high energy costs, still elevated interest rates, but also an uncertain economic outlook. Against this backdrop, the German economy contracted again in 2024,” Brand continued.
This is already the second year in a row. In 2023, German GDP fell by 0.3 percent, and in 2024 by 0.2 percent. Although Poles have recently been buying German cars in droves, eliminating half of the decline in their exports from Germany to China, it was not enough to even eliminate the economic decline.
Collapse in industry and construction
In the manufacturing sector, gross value added fell significantly by 3.0 percent compared to the previous year. In particular, important areas such as mechanical engineering and the automotive industry produced significantly less. In energy-intensive industries, which include the chemical and metal industries, production remained low. Earlier in 2023, it fell significantly as a result of a sharp increase in energy prices.
In construction, gross value added fell by 3.8 percent in 2024, slightly more than in the previous year. The persistently high construction prices and interest rates resulted in fewer residential buildings being built. The finishing industry also recorded a decline in production. Modernization and construction of new roads, railways and lines resulted in the development of civil engineering.
In 2024, the services sector grew by 0.8 percent year-on-year. Retail and transport service providers recorded growth, while automotive, wholesale and catering trade generated less than in the previous year.
In turn, the information and communication sector continued to grow by 2.5 percent. This also applied to the sectors of the economy dominated by the state: in addition to public administration itself, the areas of education and health care continued to develop. The total gross value added of these areas increased significantly compared to the previous year by 1.6 percent.
Investments are falling
Gross fixed capital formation fell by 2.8 percent in total compared to the previous year. The persistently high construction costs had an adverse effect on construction investments. They fell by 3.5 percent after taking into account prices in 2024, Destatis reports.
The largest decline in investment was recorded in residential construction, for the fourth year in a row. Investment in equipment — this applies primarily to machinery, equipment and vehicles — fell even more than construction investment in 2024. After taking into account prices, they were 5.5 percent lower compared to the previous year.
Price-adjusted private household consumer spending increased most in the area of health (+2.8 percent) and transport (+2.1 percent). Private households, on the other hand, spent less on catering and accommodation services than a year ago (-4.4 percent), and less on clothing and footwear was purchased than in 2023 (-2.8 percent price-adjusted).
In 2024, the state’s price-adjusted consumer spending rose significantly more than private consumer spending, increasing by 2.6 percent.
“This increase was due in particular to a noticeably increased state social benefits in kind. Social insurance spent more money on, among other things, hospital treatment, medicines and care,” writes Destatis. Local government spending increased, primarily due to changes in social legislation in the area of youth assistance and integration.
The difficult economic situation in 2024 was also reflected in foreign trade. Exports of goods and services fell by 0.8 percent. This was due, among other things, to lower exports of electrical equipment, machinery and motor vehicles. Price-adjusted imports, on the other hand, increased slightly, by 0.2 percent, compared to the previous year, mainly due to higher imports of services.
Employment is up
On average, 46.1 million people were employed in Germany in 2024. This number exceeded the previous year’s figure by another 72,000 workers (+0.2%) and reached a new employment peak.
However, employment growth lost momentum and stopped at the end of 2024. It occurred only in the service sectors, especially in the areas of public service providers, education and health. On the other hand, the number of people employed in manufacturing and construction fell.
