Germany's battered economy should dodge a technical recession in the immediate future, thanks to an uptick in industrial production, the central bank said today.
Europe's biggest economy has been in a years-long slump amid high energy prices, fierce competition from China and the impact of US tariffs imposed this year.
But the Bundesbank pointed to July industrial production and orders data and said that the German economy was "showing itself to be relatively robust amid a difficult environment".
German industrial output grew a better-than-expected 1.3% in July. Industrial orders fell, but the central bank said this was mainly down to natural "volatility" in the placing of large orders.
"Despite the additional burdens imposed by new US tariffs, there are no signs of a major slowdown for industry in the third quarter," it said.
"Demand for German industrial goods is fundamentally on the rise," it added.
The report will make welcome reading for conservative Chancellor Friedrich Merz, who has made shaking Germany out of its economic slump a top priority.
Germany's economy will avoid a technical recession - defined as at least two consecutive quarters of negative economic growth - if it expands in the third quarter.
Economic growth for the second quarter was in August revised down to -0.3%.
This sparked fears that a relatively strong start to the year was not down to sustained recovery but rather US customers "front-loading" orders before the US tariffs could take effect.
Merz has promised to spend hundreds of billions of euros on rearmament and infrastructure upgrades in a bid to get the country and its economy back on their feet.
But German industry faces structural challenges, including high energy costs and increasingly fierce Chinese competition in the automotive and industrial sectors.
Industrial firms' competitiveness was "weakening", the Bundesbank said, adding that they were working "under capacity".
