Mubasher: Germany’s central bank on Monday said Europe’s top economy could fall into recession, a warning that would heighten the pressure on policy makers to ramp up supportive efforts.

German output would remain “lacklustre” in the third quarter of this year, and “could continue to fall slightly,” the Bundesbank said in its monthly report.

This would mark the second quarter of contraction in a row after a 0.1% decline in the three-month period ended last June, which constitutes a recession in technical terms.

The central bank highlighted the persistent downturn in industry as the main catalyst for the weakness.

“Future developments will hinge on how long the present economic dichotomy lasts and which direction it takes once it dissolves,” the Bundesbank said.

German data came worse than expected, coupled with weak corporate earnings, dragging down the country’s economy, and on the broader level, the Eurozone economy, which drove the European Central Bank (ECB) to weigh further monetary stimulus measures.

Moreover, Berlin also hinted that it might boost spending, should the economic conditions worsen.

“As things currently stand, it is unclear whether exports and, by extension, industry will regain their footing before the domestic economy becomes more severely affected,” the Bundesbank said.

The recent contraction of total output was mainly driven by fading external demand.

German exports plunged year-on-year in June, recording their biggest annual drop in three years, amid an escalating global trade disputes.

Exports “were down substantially,” as plans ahead of the initial Brexit date at the end of last March spurred businesses to stock up inventory in the first quarter.