German economic growth could slow in the third quarter, primarily due to weak manufacturing export demand, the Bundesbank said on Monday, downgrading its outlook for the euro zone’s biggest economy after a slew of subdued data.
Germany, the 19-member currency bloc’s economic powerhouse, has unexpectedly struggled in recent months with poor industrial output and trade figures dragging down sentiment, suggesting that the euro zone’s already subdued growth expectations may still be too optimistic.
“After robust growth in the spring, Germany’s economy is likely to expand somewhat more slowly in the third quarter of 2016,” the central bank said in a monthly report. “This is in part reflected in the significant deterioration in corporate sentiment.”
“Economic indicators at the start of the quarter have been very weak, particularly in industry,” the Bundesbank said.
The warning is in stark contrast with its previous prediction that the economy would grow in line with the “robust underlying cyclical upthrust” in the quarter.
Industrial production fell the most in 23 months in July while exports unexpectedly posted their steepest drop in nearly a year, adding to evidence that manufacturing is losing momentum as overseas demand, particularly in Asia, continues to wane.