Germany's economy is showing signs of life

The German economy is performing better than feared. The upwardly revised GDP growth figure for the second quarter shows: Germany has weathered the energy price shock resulting from the war in Iran relatively well. The main source of momentum came from foreign trade—a robust global economy helps. Domestic economic activity, on the other hand, remains weak. In addition, drought and low river levels are likely to have a dampening effect in the second half of the year; the Bundesbank expects, at best, a slight increase in the third quarter. We are raising our growth forecast for 2026 moderately, from 0.5% to 0.7%. Globally, the situation remains difficult: No sign of a de-escalation in the Strait of Hormuz. Although the imbalance between oil supply and demand is gradually narrowing, oil products remain expensive due to refining bottlenecks. The ECB is likely to raise interest rates again in 2026—despite the negative impact on growth.