The Bundesbank said Germany’s economy, Europe’s largest, may have contracted markedly in the final quarter of the year as the sovereign debt crisis weighs on investment and spending.
“Indicators point to a perceptible decline in economic activity at the end of the year,” the Frankfurt-based institution said in its monthly report published today. “The current weakness emanates mainly from the industrial sector, in which production has been curbed significantly.”
The Bundesbank lowered its growth outlook on Dec. 7 after the euro area, Germany’s largest export market, fell into recession in the third quarter and global growth slowed. It now predicts the German economy to expand 0.4 percent in 2013 and 1.9 percent in 2014.
“On the positive side, export expectations are now positive again,” the Bundesbank said. “In connection with an increase in business confidence this may point to the fact that the period of economic weakness in Germany can be overcome soon.”