FRANKFURT (Reuters) - Germany’s economy struggled in the third quarter on a dip in car manufacturing but the drivers of its recent expansion remain in place, so growth should rebound in the final three months of the year, the Bundesbank said on Monday.
With the European Union implementing a new motor vehicle emissions certification system, German auto makers struggled to gain regulatory clearance while production was also dampened by big dealership discounts to clear stock before the new rules came into effect.
Germany has been the engine of the euro zone’s five-year growth run and its recent wobbles have increased worries that growth cycle may be coming to a premature end, before some countries have had time to fully recover from the bloc’s debt crisis less than a decade ago.
“The economic upswing in Germany is still fundamentally intact,” the Bundesbank said in a regular monthly economic report.
“Business climate improved noticeably in the third quarter, according to the Ifo Institute, so a significant expansion of economic output is expected for the current quarter,” the bank added.
Still, third quarter growth figures, due to be published in mid-November, are likely to be sluggish as retail sales were modest and construction output pulled back from earlier highs, exacerbating the hit to growth from a big drop in industrial production.
The car industry’s struggles continued until the end of the quarter but other segments of industry fared better and the backlog of industrial orders also remained high, the Bundesbank added.
The German government recently cut its 2018 growth forecast to 1.8 percent from 2.3 percent and also lowered the 2019 projection to 1.8 percent from 2.1 percent, citing the impact of global trade disputes, labor shortages and the auto sector’s difficulties.
Reporting by Balazs Koranyi; Editing by Raissa Kasolowsky