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Europe's biggest economy suffered a brief recession around the
turn of the year and produced flat growth in the second quarter,
so a contraction in the current period would mean four straight
quarters with negative or flat growth.
"Despite the somewhat slowing pace of price increases, strong
wage increases and the good labour market, private households
are still holding back on spending," the central bank said.
"In addition to consumer restraint, the increasing weakness of
industry is also weighing on economic performance," it added.
Euro zone inflation has halved since late 2022 but at 5.3%,
remains uncomfortably high and the European Central Bank has now
raised its deposit rate to a record high 4% to arrest quick
price growth.
This rise in financing costs will also weigh on growth, the
Bundesbank said, as will the declining order intake for the
country's vital and vast industrial sector.
"The low and continued decline in incoming orders, and the
declining order backlog are increasingly having an impact on
industrial production," the central bank said.
Germany's industry, heavily exposed to exports, has been
particularly hard hit by weak demand from China and its
prospects for recovery remain weak, market economists say.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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