Bundesbank Says German Economy Already Showing Signs of Recovery

The Bundesbank said the German economy, Europe’s largest, has started to show signs of recovery after a probable contraction in the final quarter of last year.

“The largely stable labor market and a better outlook for output suggest that the economic weakness won’t last all that long,” the Frankfurt-based central bank said in its monthly report today. A recovery “is already appearing in the first quarter of 2013,” it said.

German gross domestic product may have dropped as much as 0.5 percent in the fourth quarter from the third, according to a Jan. 15 preliminary estimate by the Federal Statistics Office, as weaker demand from the euro area and slower global growth damped exports and investment. The Bundesbank lowered its growth outlook on Dec. 7 after the euro area fell into recession, and now predicts the German economy will expand 0.4 percent this year and 1.9 percent in 2014.

“At the turn of the year, however, the outlook has brightened,” the Bundesbank said today. “Companies’ expectations have noticeably improved, particularly the estimation of export opportunities.”

European Central Bank President Mario Draghi this month hailed “positive contagion” in financial markets after the announcement of the ECB’s bond-buying program eased concerns about the sovereign debt crisis.

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