The German economy is set to expand by just 0.6% next year as uncertainty from the euro zone debt places a strain on economic activity in Europe's biggest economy, the Bundesbank said today.
"Following a 3% rise in economic output in the current year, the pace of expansion in Germany is likely to fall perceptibly to 0.6% in 2012," the German central bank wrote in its regular monthly report. Previously, the Bundesbank had been pencilling in growth of 0.75% for next year.
The figures were based on the assumption that there would be no further significant escalation of the government debt crisis, the central bank said.
It was working from a baseline scenario where current uncertainty on the part of investors and consumers would "gradually recede somewhat", enabling the euro area to gradually return to a sound growth path, the Bundesbank wrote.
"Under these conditions, Germany might see gross domestic product growth of 1.8% in 2013," which effectively meant the German economy "would be operating, by and large, at normal capacity," it said.
Meanwhile, Inflation in Germany eased fractionally in November, continuing to come down from a three-year high recorded in September, official final data showed today.
The consumer price index for the euro zone's largest economy rose by 2.4% on a 12-month basis in November, compared with 2.5% in October, the national statistics office Destatis said.
In September, inflation had reached 2.6%, the highest level in Germany in three years. On a monthly basis, the cost of living was unchanged. The final data confirmed a preliminary estimate published at the end of last month.
As in previous months, rising household energy costs, in particular for heating oil and gas, were the main factors behind the elevated level of inflation, it said.
Using the EU's Harmonised Index of Consumer Prices or HICP, which is the European Central Bank's inflation yardstick, the cost of living in Germany rose by 2.8% on a 12-month basis in November, slightly lower than the 2.9% recorded in October. The ECB aims to keep inflation close to, but below 2%.
