BERLIN, Oct. 14 (Xinhua) -- Germany's economy got back to a recovery path after stronger-than-expected growth in the first half of the year, but appears to have lost momentum again in the third quarter, the government said in an assessment released Wednesday.
In its monthly report, the Federal Ministry for Economic Affairs and Energy said the recovery likely slowed temporarily in the third quarter, dragged down by sluggish industrial activity, weaker exports and subdued domestic demand.
It pointed to fading demand for energy-intensive goods, which had supported industrial output and exports earlier in the year, as well as inland shipping disruptions caused by low water levels over the summer.
Citing the Federal Statistical Office (Destatis) data, the ministry said industrial rebounded 2 percent in August after a 1.2-percent decline in July, driven largely by a surge in construction output that partly reflected the completion of a major energy infrastructure project.
New industrial orders, meanwhile, plunged 10.6 percent month-on-month in August, largely due to a sharp drop in large-scale contracts for transport equipment including ships and military vehicles after an exceptionally strong July.
Such orders have been a major source of volatility in German industrial demand and output as Berlin has ramped up debt-funded spending on infrastructure and defense this year, giving much of the industry a significant boost.
Business surveys have also pointed to an overall industrial recovery. After contracting for much of the past three years, Germany's manufacturing Purchasing Managers' Index (PMI) rose back above the 50-point threshold separating expansion from contraction this year, standing at 53.9 in September, slightly down from August's 51-month high of 54.3.
However, the ministry cautioned that underlying industrial demand remained weak. Excluding large-scale contracts, "the downward trend since spring had not been reversed," it said.
The German Chamber of Commerce and Industry (DIHK) echoed concerns over the lack of a broad-based recovery. Jupp Zenzen, an economic expert at the chamber, said much of this year's industrial momentum had come from defense spending, while manufacturing orders had stagnated for months once large-scale contracts were excluded.
"Broadly, economic momentum is lacking," Zenzen said, calling for structural reforms to boost Germany's industrial competitiveness.
Meanwhile, Germany's exporters are facing renewed pressure after a strong first half of the year, when shipments were boosted in part by front-loaded demand linked to the Middle East conflict. Exports fell for a second straight month in August, according to Destatis.
Citing surveys by the Munich-based ifo Institute, the ministry said weakening expectations in key sectors, including the auto industry, and shipping disruptions caused by low water levels on inland waterways were likely to weigh on exports, pointing to slower third-quarter growth.
Adding to the woes of a fragile recovery, a surge in energy prices has fueled renewed inflationary pressures, straining households and businesses further.
Destatis data released Tuesday showed Germany's inflation rate climbed to 3.3 percent in September, the highest level in nearly three years, from 2.9 percent in August and 2.8 percent in July.
Energy prices jumped 14.9 percent year-on-year in September, their sharpest increase since February 2023, as higher fuel and heating oil costs pushed up consumer prices.
The Economy Ministry warned that consumer prices were expected to keep rising into winter, mainly due to persistently high energy costs. It also noted signs that businesses were increasingly passing higher costs on to consumers.
To ease the burden, the government introduced temporary fuel tax cuts on Oct. 1, aimed at lowering petrol and diesel prices by around 17 euro cents (0.19 U.S. dollars) per liter through the end of the year. The move is expected to shave around 0.1 percentage points off inflation in the fourth quarter, the ministry said.
Berlin also plans to introduce a temporary fuel price cap by January 2027, as part of broader efforts to shield households and businesses from high energy costs.
Despite these measures, the government's autumn economic forecast, released last week, projected that inflation would accelerate from 2.2 percent in 2025 to 2.7 percent this year, before rising further to 3 percent in 2027, largely driven by surging energy prices.
Persistently high corporate insolvencies remain another concern for Germany's recovery.
Citing the latest figures from the Halle Institute for Economic Research (IWH), the ministry said insolvencies rose 9.2 percent month-on-month in September to 1,666, up 13.4 percent from a year earlier. In the third quarter, insolvencies hit their second-highest quarterly level since 2005, it said.
