The German economy is contracting already and will likely get worse over the winter months as gas consumption is cut or rationed, the country's central bank said today.

Russia had supplied about 40% of the European Union's gas before the Ukraine conflict.

Since it has shut the pipeline which takes fuels to Germany, Europe's largest economy is looking for alternative sources and ways to cut usage.

The Bundesbank said the economy was likely to shrink even if outright rationing is avoided as companies cut or halt production.

"Economic activity may pull back somewhat this quarter and shrink markedly in the autumn and winter months," the central bank said.

It cautioned, however, that it did not expect the adverse scenario it published in June, which saw the economy contracting by 3.2% in 2023, to materialise.