Germany: Bundesbank says economy loses momentum in Q3, with low river levels taking their toll

Restricted transport routes are affecting production and exports

(Il Sole 24 Ore Radiocor) - The German economy is expected to lose momentum temporarily in the third quarter. This is according to the Bundesbank’s August monthly report, which adds that the consequences of low water levels in the major rivers could slow the economic recovery.

The German economy – the report notes – began the second half of the year with a “fairly solid” economic performance, both in terms of industrial orders and thanks to the boost provided by public spending on defence and infrastructure. However, “several factors exerting pressure” remain, starting with the limited availability of transport routes due to the drought, and rising transport costs, which “are expected to have a significant impact on industrial production and export growth”. Low water levels will have a tangible impact “on overall economic activity in the third quarter as well”, writes the central bank.

Among the factors contributing to weakness, the institute cites the ‘still low’ level of industrial capacity utilisation and the slowdown in business investment resulting from the rise in interest rates; whilst, in the services sector, the sectors most closely linked to consumption will come under pressure due to energy prices weighing on private consumption and households’ reduced propensity to spend, driven by cautious income expectations.

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