Bundesbank Expects German Growth to Continue at Subdued Pace

(Bloomberg) -- German economic growth is likely to remain subdued at least through the first half of the year as deteriorating business expectations threaten to hamper company investment -- yet there’s no reason for concern, according to the Bundesbank.

“There are no signs that the slowdown is morphing into a downturn,” the country’s central bank said in its monthly report. Some temporary effects such as troubles in the car industry that damped output last year have subsided, while a solid labor market and strong wage increases are set to boost private consumption. Fiscal stimulus should further bolster spending.

Bundesbank Expects German Growth to Continue at Subdued Pace

In the near term though, Europe’s largest economy will have to struggle through. Manufacturing orders outside the car industry don’t signal any pickup in momentum in the winter months, the Bundesbank said.

The assessment comes after the German economy barely avoided a recession at the end of last year. With weakness spreading to the rest of the euro-area economy, European Central Bank policy makers have become increasingly uneasy. French Governor Council member Francois Villeroy de Galhau called the region’s slowdown significant and suggested officials could push back plans for raising interest rates.

Bundesbank President Jens Weidmann said last week that the current soft patch seems to be a “bit more protracted than what we initially thought.” At the same time, there are “good reasons” to believe inflation is still on track toward the ECB’s goal -- the ultimate guidepost for monetary policy.

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