The German economy will probably shrink again in the current quarter as a new wave of coronavirus infections stops many people from going to work, the Bundesbank said on Monday, while predicting a rebound in the spring.
Europe’s largest economy went into reverse in the last three months of 2021 as its large industrial sector was hit by supply snags.
These were now easing but the rapid spread of the Omicron variant was affecting services and employment in general.
“Unlike in previous waves of the pandemic it is not just activity in the services sector that is likely affected by containment measures and behavioral changes,” Germany’s central bank wrote in a monthly report.
“Instead, pandemic-related absence from work is likely to dampen economic activity markedly also in other sectors.”
The Bundesbank said German industry was providing “a positive impulse” to the economy thanks to easing supply bottlenecks and high demand, setting the stage for a rebound in the spring if the pandemic subsided.