Buildings on the bank of the River Spree and the television tower in Berlin, Germany, August 17, 2025. REUTERS/Annegret Hilse

By Friederike Heine

BERLIN (Reuters) -Germany's gross domestic product stagnated in the third quarter, data showed on Thursday, highlighting the struggle Europe's biggest economy faces in regaining momentum as exports dwindle.

The GDP stagnation was in line with forecasts, preliminary data from the statistics office showed, after Germany's economy shrank by 0.3% in the previous quarter as weak global demand and U.S. import tariffs weighed on exports.

"The U.S. tariff shock and intense competition with China will continue to make things difficult for export-oriented industries," said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe.

Germany's Chancellor Friedrich Merz has promised to haul the country out of the downturn with a sharp rise in infrastructure and defence spending. But those measures are taking longer than expected to translate into better conditions on the ground.

"The fiscal package is no substitute for the structural reforms that are so important," Krueger said.

Persistently high unemployment, which hit 3.02 million in August - its highest in a decade - is an added concern.

The number of people out of work unexpectedly declined slightly in October, labour office figures showed on Thursday, slipping by about a thousand to 2.973 million - an unchanged seasonally-adjusted rate of 6.3%.

Labour Office head Andrea Nahles cautioned against undue optimism, however, saying that employment growth remained weak.

"Overall, the autumn recovery has been sluggish so far," she said in a statement.

Inflation eased or remained stable in four key German states in October, preliminary data showed on Thursday, pointing to a slowing in national inflation and reversing an upward trend.

In Germany's most populous state, North Rhine-Westphalia, inflation was steady at 2.3% in October, while it slowed in Bavaria, Baden-Wuerttemberg and Lower Saxony, to 2.2%, 2.3% and 2.2% respectively.

(Reporting by Kirsti Knolle, Natascha Koch, Writing by Friederike Heine, Editing by Madeline Chambers and Alexander Smith)