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Bundesbank: German Economic Activity Could Decline Slightly In Q3

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The German economy could shrink further in the third quarter as the slowdown in the industry continues and this is set to gradually affect some parts of the service sector, the Bundesbank said in its monthly report, released Monday.

Official estimates revealed last week that the biggest euro area economy contracted 0.1 percent in the second quarter, almost entirely reversing first quarter's 0.4 percent expansion.

The economy shrank due to the sustained slowdown in industry, and as weaker global growth and trade wars dampened foreign demand for German goods.

Two consecutive quarters of economic contraction translates to a technical recession.

Describing the recent decline in economic activity as a slowdown in the economy, Bundesbank President Jens Weidmann said, "The domestic economy is still doing well, with the weakness so far concentrated on industry and exports."

"Important reasons are the international trade conflicts and Brexit."

Labor market leading indicators are giving a mixed picture as manufacturers are further scaling down their hiring plans, the central bank said.

Meanwhile, construction and service sector firms, except those in the trade industry, are having positive employment plans, the report noted.

The latest Purchasing Managers' survey showed that the German private sector expanded at its slowest rate in over six years in July amid a deepening downturn in manufacturing and slowing service sector growth.

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