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Germany growth outlook nears 1% as H1 GDP recovery strengthens
Deutsche Bank expects inflation to average 2.7% in 2026, squeezing real wage gains even as expansionary fiscal policy lifts investment into late 2026 and 2027.
Deutsche Bank said Germany’s stronger-than-expected GDP performance in the first half of 2026 is pushing its outlook for annual growth closer to 1%, up from a prior forecast of 0.5%. The bank cited an upward revision to Q2 GDP growth to 0.3% quarter-on-quarter, alongside Q1 momentum of 0.4% and a statistical carry-over of nearly 0.2 percentage points from 2025.
The note also expects near-term transport headwinds to stay contained as Rhine water levels recover, though it warned growth could temporarily stall in Q3 and possibly stagnate. It said fears of a Q3 GDP contraction look less justified for now, even if momentum slows.
On the demand side, Deutsche Bank pointed to private consumption as the weak spot. It attributed the drag to consumer price inflation of 2.7% in 2026, which it said is eroding purchasing power as inflation absorbs much of the projected 3% increase in collectively agreed wages, with consumer sentiment remaining subdued.
Finally, the bank argued expansionary fiscal policy should support the growth picture in the second half. It projected the federal deficit to rise to 4.1% of nominal GDP in 2026 and 4.2% in 2027, with effects increasingly visible through higher investment momentum in late 2026 and 2027.