German central bank expects economic growth to pick up again in Q4

Germany's central bank expects economic growth to accelerate again in the fourth quarter following stagnation in the previous months.

"German economic output is likely to improve again markedly in the fourth quarter," the Bundesbank said in its monthly report on Wednesday.

"However, the future economic recovery depends, not least, on the development of the war in the Middle East."

Following two consecutive years of recession, Europe's biggest economy posted marginal growth last year, a trend that continued in the two first quarters of 2026.

However, this recovery appears to have been "temporarily interrupted" in the third quarter, with the bank projecting that gross domestic product is likely to have contracted between July and September.

Bundesbank economists attribute this to "temporary factors," mainly the low water levels in the Rhine seen this summer during long periods of drought, which weighed on industrial supply chains and foreign trade.

"The low water levels are also likely to continue to have a negative impact on foreign trade via European ports as a result of restrictions on inland water transport," the bank wrote.

Meanwhile, private consumption is being held back by soaring inflation, with high energy prices in particular placing a strain on consumers, according to the Bundesbank.

According to the bank’s analysis, private consumption is unlikely to have provided any significant impetus to growth in the third quarter.

"Energy price inflation is likely to remain at a very high level for the period from October to December," the bank forecast, despite a fuel rebate reintroduced by the government last month to bring down petrol and diesel prices that have surged due to the war on Iran.