The German economy probably shrunk somewhat in the third quarter, the Bundesbank said in its monthly report, released Monday.
The central bank noted that weak foreign demand for industrial products was one of the factors that weighed on economic activity.
Moreover, the rising financing costs dragged investment and in turn depressed domestic demand, in construction and in industry, said Bundesbank.
Further, the bank noted that the economy received tailwind from the robust labor market and strong wage increases amid easing inflation.
However, weak retail sales in the retail and hospitability sectors suggested that private households were not utilizing additional funds to increase consumer spending, rather they saved funds.
Regarding consumer prices, the central bank said the inflation rate should weaken somewhat in the coming months.
In the second quarter, gross domestic product posted nil growth after a 0.1 percent fall in the first quarter and a 0.4 percent decline in the fourth quarter of 2022. Thus the biggest euro area economy ended a short period of recession.