In the Bundesbank’s assessment, the German economy is likely to have grown again in the final quarter of 2018, albeit only modestly. As a result, growth probably did not return to the robust pace of the first half of 2018 following the setback in the third quarter as had initially been expected, the Bank writes in the latest edition of its Monthly Report.

Major damper for industrial output

According to the Report, this is primarily attributable to disappointing developments in industry. Industrial output saw a steep decline in November, contracting by 1¾% on the month in seasonally adjusted terms. On an average of October and November, it was also significantly down on the third quarter. “The downward movement affected a wide range of sectors in the period under review”, the Bundesbank's economists write. New orders received by German industry also fell significantly in November and were down by 1% on the previous month in seasonally adjusted terms.

The Bundesbank believes that the weak level of production in the automotive sector is dragging on longer than initially expected. Output was returning to normal only very gradually after the introduction of a new emissions test procedure caused extensive production stoppages during the third quarter. Economic indicators such as incoming orders and new registrations did suggest that the manufacture of motor vehicles would be stepped up again soon, the Bundesbank notes. Irrespective of this, however, data provided by the German Association of the Automotive Industry show that the seasonally adjusted number of passenger cars produced in December was only marginally higher than the November figure and still considerably below the second quarter's level.

In other manufacturing sectors, output experienced a broad-based and steep decline in November, the Bundesbank writes. The Monthly Report notes that a significant drop in industrial output can therefore now also be expected for the fourth quarter as a whole.

Private consumption provides positive stimuli

The Bundesbank’s experts state that positive stimuli will probably have been provided by private consumption given the continuing excellent labour market situation and substantial wage growth. This was suggested, they said, by the strong increase in retail sales in November.

Growth weaker than before in 2018 as a whole

According to provisional figures presented by the Federal Statistical Office, real gross domestic product grew by 1.5% in 2018 as a whole compared with the previous year. Growth in aggregate output thus weakened noticeably as compared with the robust acceleration of 2.2% in the previous year.