Germany

01Structure

Germany is built around manufacturing to a degree no other large advanced economy matches. Industry accounts for close to a fifth of gross value added, against roughly a tenth in France or the United Kingdom. Output is concentrated in four sectors — automotive, chemicals, industrial machinery and precision engineering — and is produced less by a handful of large firms than by the Mittelstand, a dense population of mid-sized specialists holding narrow global niches rather than broad consumer markets.¹

The model rests on selling specialised capital goods to whoever is investing, which makes German output a function of somebody else's capital cycle rather than of German consumption. It also concentrates risk: the same four sectors are where Chinese manufacturers have moved most decisively, and they are competing in the niches rather than beneath them.¹

Against that, research spending runs at over three per cent of GDP, among the highest in the European Union, and the capital stock is deep. The structural question is not capability but cost, which leads to sections 02 and 03.

02Trade and exposure

Roughly two fifths of German output is exported, a share that would be unremarkable for a small open economy and is extraordinary for one of this size. The consequence is that domestic activity tracks foreign demand more closely than domestic policy.

The United States is the largest single destination at about nine per cent of exports, and what goes there is the industrial core: machinery and transport equipment make up around half of it, chemicals another quarter.² The rest is overwhelmingly European — France, the Netherlands, Poland, Italy, Austria, Belgium and Czechia — which means the euro area's own condition is not an external factor for Germany but part of its home market.

China occupies an unusual position: a major destination that has been shrinking, with German goods exports there falling in 2025.² The exposure is therefore two-sided and pulls in opposite directions — tariff policy in the United States on one side, substitution by Chinese producers in the same product categories on the other. A single number for export dependence conceals that these are different risks with different remedies.

03Energy and resources

Germany has almost no fossil resources of its own beyond lignite, and imports two thirds of the energy it uses. That dependency is old; what changed in 2022 was its character rather than its degree. Russian pipeline gas — cheap, contracted long, delivered without a shipping market in between — was replaced within about two years by a different supply structure at structurally higher cost.

Pipeline gas now comes mainly from Norway, which supplies close to half of German gas, with the Netherlands and Belgium behind it. Seaborne LNG runs through four terminals and accounts for roughly a tenth of gas imports; nearly all of that cargo originates in the United States.³ The practical effect is that a share of German industrial input cost is now set on a global spot market, and is correlated with the same country that sets the tariff on German exports.

The generating mix has moved further than the import picture. Wind is the largest single source at around thirty per cent and solar supplies close to a fifth; coal, which produced more than half of German electricity within living memory, is down to about a fifth. Nuclear generation ended entirely in 2023.⁴ For an economy whose comparative advantage is energy-intensive manufacturing, the transition is simultaneously the largest cost risk and the largest capital investment programme — which is where section 05 rejoins it.

04Labour and demography

Around forty-five and a half million people are in work, and the employment rate among 20- to 64-year-olds is above eighty per cent, high by European standards. The unemployment rate in the panel above should be read against that: it is low in level terms and has been rising from a very low base.

The binding constraint is demographic rather than cyclical, and it shows up as shortages that persist regardless of the business cycle. Healthcare is the sharpest case — the federal statistical office projects a need for some 2.15 million care nurses by 2049 — and construction is the most immediate, with roughly three in ten firms reporting vacancies they could not fill.⁵ Construction is also the sector the infrastructure programme in section 05 depends on, so the fiscal constraint and the labour constraint are the same constraint seen from two sides.

This is why German unemployment can rise while shortages worsen: the people leaving cyclical manufacturing roles are not the people the shortage occupations need, and retraining runs on a longer clock than the cycle.

05Public finances

For sixteen years the Schuldenbremse — a constitutional limit on structural federal borrowing, in force since 2009 — was the binding constraint on public investment. In March 2025 it was amended, and the amendment is large enough to change the shape of the debt series rather than its level.

Defence spending above one per cent of GDP was placed outside the borrowing limit entirely. A €500 billion off-budget fund was created for infrastructure, to be spent within twelve years, of which €100 billion is earmarked for climate investment. The Länder, previously required to balance their budgets, may now borrow up to 0.35 per cent of GDP a year.⁶

Two things follow for reading the debt figure in the panel above. The ratio has a rising path built into it by legislation rather than by circumstance, so an increase over the next decade is the policy working rather than failing. And the constraint has moved from authorisation to delivery: the money is available, and whether it is spent depends on planning capacity, permitting and the construction labour discussed in section 04.

06Money and prices

Germany has set no policy rate of its own since 1999. The rate shown above is the European Central Bank's, and it is set for a currency area in which Germany is the largest single economy but nowhere near a majority of it. German conditions therefore inform the rate without determining it — the standing asymmetry of membership, and the reason this site shows the euro area's rate on a German page rather than a dash.

On prices, the recent history is unusually sharp for a low-inflation economy: the five-year window in the panel above opens on the 2022 energy shock, when German consumer price inflation exceeded eleven per cent, and closes near the ten-year average. That path is why the ten-year mean is a poor summary for Germany at present — it is an average of two regimes rather than a description of either.

07What the models expect

These are computed on this site from each series' own history, and are nobody's official projection. The bar is the range the figure lands in half the time; the dot is the central path.

Replayed from past origins on today's revised figures, the same baseline was usually off by 0.46 on consumer price inflation, 1.50 on real gdp, 0.12 on unemployment rate, 0.60 on central bank policy rate, 3.33 on government debt.

08Structural indicators

The figures behind the sections above. They move by a point or two a year, so each carries the year it was measured.

09Sources and method

Live figures: Eurostat, Bank for International Settlements. Each is fetched nightly and validated before publication; the delivery report on /status/ says how old every one of them is. Profile written 2026-09-10, next review September 2027.

1. Industrial structure, the Mittelstand, and Chinese competition in the same niches — The Global Economics, May 2026; KPMG, Economic Key Facts Germany
2. Export destinations, product composition and the decline in exports to China — Destatis, ranking of trading partners; Destatis, Germany as an EU trading partner
3. Gas supply shares and LNG terminal throughput — Bundesnetzagentur, gas supply figures for 2025; Clean Energy Wire
4. Electricity generation mix and the end of nuclear generation — Ember; IEA, Germany
5. Employment level, the nursing projection to 2049 and construction vacancies — Destatis, January 2026
6. The March 2025 constitutional amendment: defence exemption, €500 bn fund, Länder borrowing — European Commission, Spring 2025 forecast; Bruegel