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Bundesbank Says German Economy Still Weak Despite Recent Pickup

Bundesbank Says German Economy Still Weak Despite Recent Pickup

(Bloomberg) -- Germany’s economic rebound at the start of the year was largely due to one-off factors and the underlying trend remains weak, according to the Bundesbank.

Europe’s largest economy expanded 0.4% in the first quarter, after stagnating for most of the second half of 2018. Yet the German central bank pointed to fiscal measures that boosted private consumption, a bounceback in auto sales after production was constrained last year, and mild winter weather that boosted construction.

“These effects, which had largely driven growth after the turn of the year, are expected to lapse or even reverse,” the Bundesbank said in its monthly report. “Moreover, downturn forces continue to be prevalent in industry, and they may even intensify somewhat.”

Germany’s economy, once seen as a regional powerhouse, has crumbled under the pressure of domestic woes in the car industry and trade tensions that have weighed on exports. That’s concern for European Central Bank policy makers as they prepare for a June 6 meeting at which they’ll update their projections and discuss how much stimulus the euro zone needs.

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The Bundesbank said a gradual rebound in economic activity is only expected for the second half of the year alongside a global economic recovery.

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint

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