German economic recovery facing 'brief pause' - Bundesbank

Germany’s economic recovery is likely to falter in the coming months, the country’s central bank said on Monday, hit by shortages of goods and labour as well as rising Covid-19 cases.

Publishing its monthly report, the Bundesbank said the global economic recovery had lost "significant momentum" in the last three months, which it attributed to a "severe" shortage of intermediate goods in a number of regions as well as a resurgence in Covid-19 infections.

Other factors affecting the global recovery included problems in the Chinese real estate market and weather-induced production losses in the US.

In Germany, the bank said economic activity had continued to see a "substantial recovery" in the third quarter, led primarily by strong growth in the services sector. But it acknowledged that industrial output had also declined during the period, hit by the shortages in intermediate goods and commodities as well as labour, which also affected the construction sector.

"Overall, although the economy exited the second quarter with considerable momentum, it is unlikely to have picked up any more speed over the third quarter," it noted.

The monthly report said annual headline inflation had risen from 4.1% in September to 4.6% last month, and that it could potentially reach just under 6% in November.

It continued: "Initially there will probably be a brief pause in the economic recovery. From today’s perspective, GDP could broadly stagnate in the final quarter of 2021, after economic output already stopped rising over the course of the third quarter.

"The surge in growth coming from the services sector has probably largely come to an end for the time being, having mainly been due to a certain degree of normalisation after coronavirus measures were eased. However, some containment measures have already been tightened again.

"The industrial sector will probably continue to dampen macro-economic growth in the fourth quarter. While demand for industrial products remains high, supply problems in the industrial sector are likely to continue weighing on growth."

However, it added that macroeconomic effects will "probably be less severe than in previous waves of the pandemic".