(de-news.net) – Recent economic indicators point to a mixed but increasingly differentiated picture of Germany’s economic performance toward the end of 2025, marked by uneven regional growth, resilient consumer demand, and a labor market under strain. According to estimates provided by the Ifo Institute, economic output expanded in eight German states during the third quarter of 2025, underscoring a gradual stabilization following earlier weakness. The most pronounced contractions were recorded in Saarland, where output declined by 0.6 percent, followed by Rhineland-Palatinate and Schleswig-Holstein, each posting a decrease of 0.4 percent. By contrast, Hamburg and Bavaria occupied the top positions in the state rankings, achieving growth rates of 0.6 percent and 0.5 percent, respectively.
The eastern German states tended to cluster around the middle of the distribution, reflecting comparatively moderate movements in either direction. Ifo attributed these divergent regional outcomes primarily to differences in economic structure, emphasizing that the ongoing process of structural transformation has affected states unevenly depending on their sectoral composition. In particular, regions with a stronger industrial base continued to face headwinds, as industrial activity remained under pressure nationwide. However, in several states, this weakness was at least partially offset by gains in the services sector, which provided an important stabilizing effect. Compared with the second quarter of 2025—when economic output had declined in eleven states—the third-quarter results therefore represented a relative improvement in regional economic performance.
At the national level, developments in retail trade painted a more uniformly positive picture. Retail activity showed clear momentum, with real retail sales rising by 2.4 percent in 2025, according to estimates from the Federal Statistical Office. When price effects were taken into account, nominal retail turnover increased by 3.6 percent compared with the previous year, indicating that consumer spending remained robust despite broader economic uncertainty. These estimates were derived from actual retail turnover data covering the period from January through November, supplemented by projected figures for December, providing a comprehensive view of full-year performance.
Toward the end of the year, however, conditions in the labor market deteriorated further. Data from the Federal Employment Agency showed that the number of unemployed rose by 23,000 in December compared with November, bringing the total to just over 2.9 million. This represented an increase of 101,000 individuals relative to December 2024. The unemployment rate climbed by 0.1 percentage points to 6.2 percent, reaching its highest level in more than 15 years. Seasonal factors were identified as a significant driver of the monthly increase, as firms typically reduce hiring activity ahead of year-end and employment opportunities in outdoor occupations decline during the winter months. At the same time, the agency assessed that broader economic weakness over the past year had progressively weighed on labor market conditions, leaving them noticeably weaker than a year earlier. Nevertheless, available indicators were interpreted as suggesting that the downturn may have reached its lowest point.