Mubasher: Germany’s Bundesbank on Monday warned that Europe’s biggest economy might have shrunk once again in the third quarter, leading the German economy close to a recession.

This was mainly led by a downturn in export-reliant industries, while sentiment indicators do not point to an immediate turnaround, the Bundesbank said in its monthly report.

“Early indicators currently provide few signs of a sustainable recovery in exports and a stabilisation of the industry,” the report said.

Auto manufacturing activity recorded a slump during July and August, on the back of the new emissions standard, the worldwide light vehicles test procedure (WLTP).

Moreover, production of consumer goods and intermediate goods contracted sharply.

Meanwhile, segments targeted toward domestic demand are still seeing strong performance, the German central bank said, but warned against the growing risks of spillover from the manufacturing slump.

German economy shrank in the second quarter of this year, while it risks entering into a technical recession in the event of recording another contraction in the third quarter.

However, “a recession in the sense of a significant, broader and longer-lasting decline in output with underutilized capacity is currently not in view,” the Bundesbank said.