Bundesbank: Recovery of German economy hampered by low water levels

Drought and low water levels are hampering the recovery of the German economy, the country's central bank said on Thursday. 

"In the third quarter, economic output is likely to grow only slightly, if at all," the Bundesbank's monthly report for August said.

Germany's waterways have dried up in recent weeks amid a series of heatwaves, with major rivers including the Rhine registering historically low levels. 

As the transport of goods by water is currently restricted, deliveries are being delayed, transport costs are rising and production could grind to a halt, the Bundesbank warned. 

"This is likely to place a noticeable strain on the industrial economy, which is currently gaining momentum," the report added.

Exports, which in recent months have been the main driver of the German economy's unexpectedly robust growth, could face a setback. 

"The fundamental economic tailwind provided by foreign demand will, for the time being, be largely curbed."

Meanwhile, private consumption is being weighed down by persistently high energy prices. 

The inflation rate, which jumped to 2.8% following the expiry of the fuel rebate in July, could rise temporarily in the coming months, according to the Bundesbank's assessment.

In the first half of 2026, the German economy performed better than might have been expected given crises such as the war in Iran. 

Following 0.4% growth at the start of the year, gross domestic product (GDP) rose by 0.2% in the second quarter on a quarterly basis, according to preliminary calculations.

The Bundesbank noted that the German economy is therefore "now clearly on a path to recovery, which even the war in the Middle East has been unable to slow down."