By Tom Fairless 
 

FRANKFURT--Germany's economy is likely to stagnate in the current quarter as the nation's large manufacturing sector wrestles with a downdraft in global demand, the German central bank said.

The downbeat assessment of Europe's largest economy contrasts with relatively solid first-quarter growth data published last week, which showed a 0.4% expansion in the three months through March, driven by vibrant private consumption and a booming construction sector.

The Bundesbank warned Monday, however, that the first-quarter rebound was due mainly to one-off factors that are likely to lapse or even reverse. They include government stimulus measures, a temporary recovery in car purchases and brisk construction activity as a result of favorable weather conditions, the central bank wrote in its monthly report.

"German economic output in the second quarter of 2019 is not very likely to exceed the level reached in the first quarter, which had been boosted by a number of one-off effects," the report said. "Downturn forces continue to be prevalent in industry, and they may even intensify somewhat."

Germany's export-focused economy unexpectedly emerged alongside Italy as one of Europe's economic laggards in recent months, despite a strong domestic economy that boasts the lowest unemployment rate in at least three decades.

Economists blame the country's strong reliance on exports, especially to China, which has made it particularly vulnerable to the global trade tensions unleashed by the Trump administration. Policy makers in Berlin say they fear the White House could soon slap punitive import tariffs on German cars, as President Trump has repeatedly threatened, which would deal a further blow to the country's flagship export.

Still, even if the downturn in German industry is likely to continue, more domestically-oriented sectors are likely to grow, bolstered by the robust labor market and low interest rates, according to the Bundesbank.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

May 20, 2019 06:14 ET (10:14 GMT)