Germany's economic recovery is on probation: 1.3 percent growth – and yet the country is losing jobs, purchasing power, and time

The challenges behind the growth: How stable is Germany's economic upswing?

The true cost of the economic boom: Where is the prosperity for the citizens?

Germany's economy is projected to grow by 1.3 percent in 2026, a more optimistic outlook than previously anticipated. While this revision by the federal government from its initial forecast of 0.5 percent is a positive sign, the upswing should be viewed with caution. Despite the statistical improvement, citizens are seeing little benefit from this growth: purchasing power remains under pressure, unemployment is stagnating at 6.4 percent, and private consumption is growing by a mere 0.3 percent. While external factors such as strong exports and government investment are supporting demand, private sector growth remains weak. This raises the crucial question of whether Germany is truly on a stable growth path or merely emerging from a deep economic downturn. The following article examines the complex interrelationships and challenges underlying these economic developments and investigates the measures necessary to ensure a sustainable recovery.

1.3 percent growth: A ray of hope for Germany or just a deceptive illusion?

Germany's economy is expected to grow significantly stronger in 2026 than anticipated in the spring. The German government has raised its forecast for real GDP growth from 0.5 to 1.3 percent. This revision is substantial: it not only represents an adjustment of 0.8 percentage points but also alters the overall economic outlook. After several years dominated by recession, stagnation, and minimal growth, Europe's largest economy is once again showing a clearly positive growth rate.

The term "economic upswing" should nevertheless be used with caution. So far, growth has not convincingly reached either private households or the labor market. Private consumption is increasing by only 0.3 percent in real terms, the number of employed persons is expected to fall by 0.5 percent, and the unemployment rate is projected to remain at 6.4 percent. At the same time, consumer prices are rising by an average of 2.7 percent annually and could even reach 3.0 percent in 2027. The economy is therefore producing more, without this automatically generating a broader sense of prosperity.

The crucial economic factor is therefore not simply that Germany is growing again, but what is driving this growth, how robust its foundations are, and whether a short-term economic boost can translate into a sustained higher growth trajectory. The answer is mixed. Unexpectedly strong exports, public investment, and increased defense spending are supporting demand. At the same time, private investment, consumption, employment, and productivity remain too weak. The result is an upswing that is statistically visible but barely perceptible to society.

From stagnation to measurable growth

To properly contextualize the new forecast, it's worth looking at the initial situation. German economic output shrank significantly in 2023, stagnated in 2024 according to revised data, and grew by a mere 0.2 percent in 2025. Three years of decline, stagnation, or barely perceptible expansion have left their mark. Production capacities were underutilized, investment projects were postponed, vacancies were left unfilled, and in particularly hard-hit industries, jobs were even cut. The underlying problem is therefore more significant than a single growth rate would suggest.

Against this backdrop, an increase of 1.3 percent represents a genuine improvement, but not yet a boom. It is more accurately described as the end of an unusually long period of weakness. Even with growth exceeding expectations, Germany remains below the levels typical of previous recovery phases. Furthermore, the annual rate includes a statistical carryover from the stronger performance since the end of 2025 and the strong first half of 2026. Part of the reported growth has therefore already been achieved before the second half of the year can be fully assessed.

Calendar effects also play a role. A higher number of working days can increase the annual growth rate without improving underlying productivity. Such effects are relevant for national accounts but should not be confused with a lasting gain in competitiveness. The central question, therefore, is whether Germany is merely emerging from a deep economic downturn or whether businesses, households, and the government will jointly initiate a self-sustaining expansion process.

The data so far point to an economic recovery, but not yet to a structural restart. Gross domestic product rose in the first quarter of 2026 compared to the previous quarter and continued to increase in the second quarter. At the same time, consumption and investment remained subdued. The pattern is unusual: the overall economy is growing, while key domestic components are weakening. This is made possible primarily by foreign trade and government spending.

Exports provide the positive surprise

The most important reason for the upward revision lies in the improved export performance. German companies sold more goods abroad in the first half of the year than previously assumed. Foreign trade contributed significantly to growth, particularly in the second quarter. This is important for an economy with a large industrial core and a high foreign trade ratio, because additional exports can quickly boost production, transport, intermediate goods, and company sales.

However, the export recovery should not be prematurely interpreted as a return to the old German business model. Part of the momentum stemmed from special circumstances and pull-forward effects. In an environment of uncertain energy supply and geopolitical tensions, foreign buyers increased their inventories. This benefited, among other things, chemical precursors, petroleum products, and other energy-intensive goods. Such inventory movements can significantly boost demand in the short term, but can later reverse as stockpiles are reduced.

Furthermore, the international competitive position of German manufacturers remains under pressure. High energy prices, increased labor and social costs, a partially outdated infrastructure, lengthy approval processes, and growing competition from China are weighing on the industry. This is particularly evident in the automotive industry, mechanical engineering, the chemical industry, and parts of the metal processing sector. German companies are technologically strong in many niche areas, but at the same time, they must bear higher location costs and invest in new products, digitalization, and climate-neutral processes.

The export recovery is therefore good news, but no proof that the structural problems have been solved. It buys time and stabilizes capacity utilization. Whether this will become a sustained growth engine depends on whether companies can maintain market share, develop new sales markets, and improve their cost position. If exports remain primarily dependent on one-off effects, their contribution is likely to decline as early as 2027.

For economic policy assessments, it is also important to recognize that high exports alone do not guarantee a general increase in prosperity. If expensive energy and intermediate goods have to be imported for production, real income may grow more slowly than output. Crucially, not only the quantities but also the price ratios between exports and imports are decisive. If these so-called terms of trade deteriorate due to expensive energy imports, a portion of the generated value creation flows abroad.

The state compensates for missing private dynamism

The second major driver of growth is the government. Additional spending on defense, transportation, energy, digitalization, and other infrastructure projects directly increases overall economic demand. Construction companies, equipment suppliers, IT service providers, engineering firms, logistics companies, and manufacturers of security-related products receive more orders. Further indirect effects arise through wages, intermediate purchases, and investments.

In a weak economy, this fiscal stimulus can be beneficial. When private companies invest less due to uncertain demand, high financing costs, and geopolitical risks, the government prevents this reluctance from becoming self-perpetuating. Public contracts stabilize capacity, secure skills, and create planning prospects. Investments in rail networks, bridges, power grids, digital administration, and municipal infrastructure, in particular, can simultaneously increase short-term demand and long-term production potential.

However, government-generated growth is not automatically high-quality growth. Economically, what matters is how the money is spent, how quickly projects are implemented, and what additional benefits they create. If more is simply paid for existing services because construction, personnel, and material costs have risen, the nominal volume of spending increases without a corresponding increase in real infrastructure. Delays, planning errors, and bureaucratic inefficiencies can significantly reduce the multiplier effect.

Defense spending plays a special role. It strengthens security, industrial capacity, and technological expertise, but does not increase civilian productivity in the same way as a new railway line or a high-performance power grid. Furthermore, some of the demand flows into imported systems and components. Therefore, for the overall economic impact, it is crucial whether additional funds generate added value in Germany and Europe, promote research, and reach small and medium-sized enterprises (SMEs) via longer supply chains.

The state can stimulate the private sector, but it cannot permanently replace it. If growth stems primarily from public spending, dependence on budgetary decisions and available funding increases. As soon as the fiscal stimulus weakens, the private sector must take over. This is precisely one of the weaknesses of the current scenario: The forecast for 2026 is significantly better, while the expected momentum declines again in 2027 and especially in 2028.

Growth that barely registers in everyday life

For many citizens, the improved economic situation seems abstract. This is because gross domestic product (GDP) and personal living standards can develop differently. GDP measures the value of goods and services produced domestically. It doesn't directly indicate how income is distributed, how expensive housing and energy are, or how secure employees perceive their jobs to be.

While wages have risen significantly in nominal terms recently, averaging 4.1 percent higher in the second quarter of 2026 compared to the previous year, this translates to a real wage increase of approximately 1.5 percent, coupled with a simultaneous rise in consumer prices of 2.5 percent. This indicates that the recovery in purchasing power is generally continuing. Nevertheless, consumer spending remains cautious, as households are reacting not only to current income but also to expectations and risks.

Many people experienced a significant loss of purchasing power during the years of inflation. Even when the inflation rate falls, prices generally do not return to their previous levels; they merely rise more slowly. Food, energy, rent, insurance, and services have become permanently more expensive. Real wage increases must therefore first compensate for previous losses before they are perceived as new financial flexibility.

Added to this is the uncertainty surrounding jobs and social security contributions. When companies cut jobs, consider short-time work, or postpone investments, caution increases even among employees whose income is currently stable. Higher contributions to health, long-term care, or pension insurance can eat up some of the wage increase. The relevant figure for consumer decisions is not the gross wage, but rather the disposable income after taxes, social security contributions, and unavoidable expenses.

Therefore, it is plausible that private consumption expenditure will only increase by 0.3 percent in real terms in 2026. This is insufficient to provide robust support for the domestic economy. The situation will thus remain difficult for retail, hospitality, leisure, and consumer-related services. Overall economic growth will be more concentrated in export-oriented and public-sector sectors, while many companies with direct customer contact will feel little of the upswing.

Inflation remains the invisible adversary

The expected inflation rate of 2.7 percent in 2026 is above the European Central Bank's medium-term stability target. The German government even anticipates 3.0 percent for 2027. This would initially intensify price increases, even though the economy is only growing moderately. Such a combination complicates economic policy management because, while monetary easing could stimulate growth and investment, it could also create new price risks.

Energy prices are a major source of uncertainty. Conflicts in the Middle East could disrupt oil and gas supplies, increase transportation costs, and raise risk premiums. Germany, as an energy-importing industrial nation, is particularly vulnerable. Higher import prices initially affect refineries, chemicals, metals, glass, paper, and logistics. Later, they reach almost all sectors, including private households, through electricity, heating, transportation, and intermediate products.

The pass-through of inflation is often delayed. Companies hedge energy prices through contracts, suppliers don't adjust tariffs daily, and many services only react to increased costs with a considerable delay. Therefore, inflation can remain high even after wholesale prices have stabilized. Conversely, falling energy prices don't provide immediate, complete relief either.

Besides energy, services are playing an increasingly important role. Rising wages are understandable and economically necessary after the loss of purchasing power, but they increase costs in labor-intensive sectors. If productivity and labor supply do not increase accordingly, companies pass on some of this burden through higher prices. This does not necessarily lead to a sustained wage-price spiral, but so-called core inflation can be more persistent than overall inflation.

Higher price increases explain why nominal improvements in wages, sales, and government spending are not fully translated into real gains in prosperity. For households, what matters is what they have left over after shopping. For businesses, what matters is how much real output they can finance with their budget. Inflation thus acts like a filter, removing some of the economic upswing from perception and from balance sheets.

Consumption refuses to play its traditional role

In an ideal economic upswing, production and employment rise, followed by increased income and consumption, which in turn leads to more investment from companies. Germany is currently only partially completing this chain. Production is increasing, but employment is falling. Wages are rising, but inflation is absorbing a significant portion of the gains. Consumption is growing, but at 0.3 percent, it remains virtually stagnant.

The high propensity to save is not entirely irrational. Households are reacting to a real increase in risks: geopolitical conflicts, high energy prices, a weak industrial sector, debates about pensions and social security contributions, and concerns about job losses. Those who can postpone major expenditures for cars, furniture, travel, or renovations are often waiting for greater security. This results in a lack of demand for businesses, which in turn dampens hiring and investment.

The unequal burden across income groups is particularly problematic. Low-income households spend a larger share of their budget on housing, energy, and food. Price increases for these goods affect them disproportionately, even though the official inflation rate represents an average. Higher-income households are more likely to have savings and can cushion real losses, but they also have the option of saving additional income instead of spending it.

A sustainable recovery in consumer spending therefore requires more than just rising wages. It needs stable employment, credible energy and social policies, and reliable expectations. Temporary relief measures can alleviate acute hardship, but they cannot replace lasting trust. The longer households perceive that rising gross incomes are being eaten up by prices, contributions, and taxes, the weaker their propensity to consume will be.

This is crucial for growth because private consumption constitutes the largest demand component of the economy. Germany can compensate for a temporary weakness through exports and government spending. However, a balanced recovery is hardly possible in the long run if domestic purchasing power does not increase more significantly.

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The labor market is sending a warning signal

The decoupling of growth and employment is particularly striking. Although real gross domestic product is projected to rise by 1.3 percent in 2026, the number of employed persons is expected to fall by 0.5 percent. A further decline is also anticipated in 2027. The unemployment rate is expected to be 6.4 percent in both years. In September 2026, nearly three million people were registered as unemployed; seasonally adjusted, unemployment continued to rise compared to the previous month.

A time lag is normal. Companies often only hire additional staff when they are convinced of a sustained recovery in demand. After a prolonged period of weakness, they initially make better use of existing capacities, reduce short-time work, or increase working hours. New hires incur long-term costs and are therefore postponed when uncertainty is high.

However, the current decline in employment also has structural causes. The baby boomers are reaching retirement age, and the influx of younger workers is insufficient to fully replace those leaving. At the same time, job openings and available qualifications often don't match. While industrial companies are reducing staff, there is a shortage of qualified professionals in nursing, education, skilled trades, IT, construction planning, and technical professions.

This simultaneous occurrence of unemployment and skills shortages is not a contradiction. It demonstrates that the labor market is fragmented regionally, occupationally, and in terms of qualifications. An employee from a specialized industrial manufacturing sector cannot simply fill an open position in software development or nursing. Retraining, further education, and mobility take time and only work if suitable programs, financial incentives, and realistic career prospects are available.

In addition, there is a productivity-related adjustment effect. Companies that have suffered from high costs and low capacity utilization for years are trying to produce more with fewer employees. Automation, digitalization, and artificial intelligence can help with this. In the short term, productivity can increase while jobs are lost. In the long term, a higher level of productivity would be positive, provided that new activities and investments are created. However, if investment activity remains weak, instead of productive modernization, only defensive staff reductions are likely.

The private investment gap remains open

The biggest weakness of the upswing lies in private investment. Companies invest when they expect growing sales opportunities, reliable regulations, and a reasonable return. Currently, several obstacles are acting simultaneously: high energy and financing costs, geopolitical uncertainty, low capacity utilization, bureaucracy, a shortage of skilled workers, and doubts about the long-term competitiveness of the location.

Investment restraint has a twofold effect. In the short term, there is a lack of demand for machinery, equipment, construction services, and business software. In the long term, the capital stock ages, productivity grows more slowly, and new technologies spread later. An economy can survive for a few years on existing capacity, but gradually loses efficiency if replacement and expansion investments are not made.

The situation is particularly critical in energy-intensive industries. Chemical, metal, glass, paper, and building materials companies need not only low, but above all, predictable energy prices. If it remains unclear at what cost electricity, gas, hydrogen, or grid access will be available in five or ten years, the willingness to make long-term location decisions decreases. Subsidy programs can enable individual projects, but they do not solve the general cost and planning crisis.

Housing construction is also suffering from high interest rates, increased construction costs, scarce land, and complex regulations. Weak new construction exacerbates housing shortages, increases rents, and limits labor mobility. Thus, a problem in the construction sector becomes an obstacle for the entire labor market.

Public investment can stimulate private projects by eliminating bottlenecks. A high-performance electricity grid makes new industrial projects more attractive, expedited permitting shortens production times, improved transportation infrastructure reduces logistics costs, and digital government services lower administrative burdens. However, public investment can also crowd out private investment when construction capacity, skilled labor, or financing are scarce. Therefore, what matters is not just the amount of government spending, but its timing and coordination with the private sector.

Industry undergoing transformation instead of returning to the old normal

German industry is not facing a simple cyclical recovery, but rather a profound transformation. Electromobility, the energy transition, digitalization, artificial intelligence, new trading blocs, and security policy requirements are all simultaneously changing products, supply chains, and business models. Therefore, it would be wrong to measure economic policy success by whether the exact previous production structures return.

In the automotive industry, value creation is shifting from combustion engines to batteries, power electronics, software, and data platforms. In mechanical engineering, the importance of digital services, autonomous systems, and integrated production solutions is growing. The chemical industry must decarbonize energy-intensive processes while remaining internationally competitive. In logistics, automation, resilient supply chains, and geopolitically secure transport corridors are becoming increasingly important.

This transformation can create new productivity and export opportunities. Germany boasts industrial networks, research institutions, a skilled workforce, and numerous specialized medium-sized companies. Its strength often lies in complex system solutions, high quality, and close collaboration between manufacturers, suppliers, and customers. These advantages won't disappear overnight.

At the same time, past success does not guarantee future market position. Competitors are investing heavily, particularly in batteries, semiconductors, robotics, renewable energy technologies, and digital platforms. If German companies scale new technologies more slowly or make the majority of their investments abroad, domestic value creation could decline despite the success of established corporations.

The current export boost is therefore giving industry a breather. It should be used to modernize business models and production processes. If, on the other hand, it is interpreted as proof that fundamental reforms are unnecessary, the positive surprise of 2026 could merely mask the pressure to adapt.

The quality of government spending is decisive

The federal government can support a short-term economic upswing, but it must simultaneously improve its long-term sustainability. This requires a clear distinction between consumption expenditures and productive investments. Not every expenditure that is politically labeled as an investment actually increases production potential. Conversely, spending on education, research, or administrative personnel can very well be investment-related, even though it appears as current expenditures in the budget statistics.

Priority should be given to projects that enable private activity: electricity and data networks, railways, bridges, ports, municipal infrastructure, schools, universities, research institutions, and digital administrative processes. The benefits arise not only from construction expenditure, but also from lower costs and faster processes for millions of economic decisions.

Equally important is implementation capacity. Billions more won't create additional bridges if planning offices are understaffed, standards remain contradictory, or legal and approval processes drag on for years. Germany therefore has not only a financing problem, but also a governance and enforcement problem. Acceleration requires standardized procedures, clear responsibilities, realistic priorities, and early coordination with states and municipalities.

Defense spending should be more strongly geared towards long-term planning, common European standards, and reliable production volumes. Frequently changing requirements and small national production runs increase system costs. Shared platforms could create economies of scale and simultaneously strengthen the European industrial base. Security policy benefits and economic efficiency must be considered together.

Debt-financed spending is more justifiable if it increases future productivity. However, if ongoing liabilities are accumulated without a corresponding increase in productivity and tax revenue, the burden is merely postponed. Therefore, economic growth should not only be measured by how much demand the government generates, but also by how much additional productive power is generated from every euro invested.

Why the momentum will slow down as early as 2027

The German government expects growth of only 1.1 percent for 2027 and a mere 0.6 percent for 2028. Leading economic research institutes are even more cautious, forecasting around 0.4 percent for 2028. This downward trend is more economically significant than the positive surprise of the current year. It suggests that some of the growth is temporary and that the long-term trend will remain weak.

Several special effects are losing their impact. Export pull-forward effects are fading, inventories are not being increased indefinitely, and the statistical surplus from a strong first half of the year is not automatically repeated. Public spending continues to have an effect, but its additional contribution to growth diminishes once spending levels no longer accelerate significantly. At the same time, private investment and consumption remain too weak to fully close the gap.

The low growth projected for 2028 points to low potential output. This refers to the economic output achievable at normal capacity utilization without sustained inflationary pressure. Demographics, slow productivity gains, and a weak capital stock are all contributing to this decline. Various estimates project German potential growth in the coming years to be only a few tenths of a percentage point.

This makes it clear: The German economy doesn't just have a demand problem, but a supply problem. Even if the government and consumers spend more in the short term, the economy cannot grow strongly in the long run if there is a shortage of workers, permits take too long, energy remains expensive, and too little is invested in modern facilities. Demand-side policies can cushion a downturn; however, they can only increase production potential if they are combined with structural reforms.

Geopolitics remains a difficult-to-calculate risk

The wars in Ukraine and the Middle East constitute the largest external uncertainty factor. They affect energy prices, trade routes, insurance premiums, defense spending, and business confidence. These channels are particularly relevant for Germany because the country is heavily integrated into international supply chains and maintains many energy-intensive production stages domestically.

Another oil or gas shock would hit households and businesses simultaneously. Consumers would have to spend more on transportation and heating, leaving less money for other goods. Businesses would face higher production and transportation costs. With rising price pressures, the European Central Bank might be forced to keep interest rates high for longer, further burdening construction and investment.

Trade conflicts also pose risks. Protectionist measures, tariffs, and national subsidy programs can make German exports more expensive or divert investments to other countries. A further fragmentation of the global economy into political blocs would be particularly problematic. Companies would have to duplicate supply chains, increase inventories, and sacrifice efficiency for security. This resilience is strategically sound, but it comes at the cost of productivity.

The right answer is not a complete abandonment of foreign trade. Germany's prosperity continues to depend on open markets, specialization, and the international division of labor. What is needed, rather, is broader risk diversification: more sources of supply, alternative transport corridors, European capacities for critical technologies, and strategic reserves in areas where short-term disruptions would cause particularly high damage.

Productivity is the real question of prosperity

In the long term, Germany can only secure its standard of living if productivity increases. With a shrinking or stagnating working-age population, every hour worked must generate more added value. Otherwise, wages, corporate profits, social security, and public budgets will all come under pressure simultaneously.

Productivity growth has been disappointing in recent years. There are both cyclical and structural reasons for this. During periods of weakness, companies often retain staff even though production is declining; this lowers measured productivity. Furthermore, low investment, slow digitalization, bureaucracy, and insufficient adoption of new technologies also hinder productivity.

Artificial intelligence, robotics, and automated processes offer opportunities, but they are not a guaranteed success. Productivity is not achieved by purchasing individual software licenses, but rather through the reorganization of workflows, data repositories, responsibilities, and skills. Small and medium-sized enterprises (SMEs) in particular need access to consulting, computing power, secure data rooms, and well-trained employees to achieve this.

Public administration can also make a significant contribution. Faster business start-ups, digital permits, automated tax procedures, and standardized data save time and capital. Such improvements may seem unspectacular at first glance, but can achieve greater effects on a broad scale than individual, prestigious large-scale projects.

Productivity policy is also education policy. Schools, vocational training, universities, and continuing education must be more strongly geared towards digital, technical, and entrepreneurial skills. Given the structural changes underway, it is not enough to simply provide better training for young people. Employees in mid-career also need realistic opportunities to acquire new qualifications without risking significant income losses.

What matters now in economic policy

The improved growth forecast creates room for maneuver, but should not lead to complacency. The reform priorities are clear: faster permitting, reliable energy conditions, a more investment-friendly tax structure, lower administrative burdens, efficient infrastructure, and a labor market that better organizes training and immigration.

Reliability is crucial when it comes to corporate taxes and depreciation. Temporary special rules can accelerate investments, but they also create windfall gains and additional complexity. Consistently attractive conditions, faster loss carryforward, and simplified procedures are often more valuable than constantly introducing new subsidy programs. Government support should focus on research, infrastructure, and clearly defined transformation risks, not on permanently compensating for uneconomical structures.

Energy policy must address security of supply, affordability, and climate goals together. A rapid expansion of grids, storage facilities, renewable energies, and flexible power plant capacities is essential. Equally important are transparent grid fees, competitive procurement, and European integration. Businesses need a reliable forecast of how their energy costs may develop.

Germany's labor market needs a combination of higher labor force participation, skilled immigration, better childcare, longer periods of voluntary employment, and further training. Individual measures are not enough. Anyone who wants to attract more workers must simultaneously improve housing, recognition procedures, language support, and digital government services.

Social security systems must not be ignored. Rising contribution rates increase labor costs and reduce net income. Without reforms to pensions, healthcare, and long-term care, demographic change threatens to burden precisely the employment and investment needed to finance the system. A growth-oriented reform must ensure reliable benefits, maintain incentives, and transparently finance non-insurance-related tasks.

A boom on borrowed time

The upward revision of the growth forecast to 1.3 percent is more than just a statistical detail. It shows that the German economy is more resilient than feared in the spring. Exporters were able to meet additional demand, the energy price shock was less severe in some areas than expected, and the government is providing noticeable stimulus through infrastructure and defense spending. After years of stagnation, this is progress.

However, the composition of this growth limits optimism. Private consumption is rising only slightly in real terms, employment is falling, the unemployment rate remains high, and inflation is expected to accelerate further initially. Companies are still investing too little because costs, uncertainty, and structural location problems persist. As a result, citizens are not experiencing an economic upswing that translates clearly into greater security and a noticeably higher standard of living.

The weaker forecasts for 2027 and 2028 make it clear that the current economic momentum could fizzle out without reforms. Government demand and special export factors are buying time, but they don't replace productivity gains or private investment. This is precisely the provocative truth behind the good news: Germany is growing again, but not yet from its own structural strength.

Whether the recovery develops into a sustainable upswing depends on how this gained time is used. If infrastructure projects are implemented more quickly, private investment is mobilized, energy and labor costs are stabilized, and new technologies are widely adopted, the growth of 2026 could become the starting point for modernization. If reforms remain piecemeal, the growth rate is likely to fall back to near stagnation soon.

The sobering perspective is therefore: 1.3 percent growth is a reason for cautious optimism, but no cause for complacency. The economic engine is running again, but it is being fueled by export stimulus and government support. Only when consumption, employment, productivity, and private investment take over will a recovery begin that truly deserves the name in everyday life.

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