FRANKFURT (Reuters) - Germany's economy will continue to struggle in the first half of the year but indicators still suggest that the slowdown could be temporary with a rebound in the second half possible, the Bundesbank said in a monthly economic report on Monday.
The German economy stagnated in the fourth quarter of last year and policymakers are increasingly concerned that weakness in Europe's biggest economy could be bigger and longer than earlier thought, a risk to the entire continent.
Weak orders in manufacturing, increasingly gloomy sentiment indicators and sluggish investments all suggest that the economy is unlikely to regain momentum during the winter months, the Bundesbank said.
"All this suggests that the underlying pace of the economy should remain subdued at least in the first half of the year," the central bank said. "But there are no signs that the slowdown is becoming an outright downturn."
It added that auto exports, a big growth drag in late 2018, are starting to normalise, the labour market remains healthy and strong wage development suggest that private consumption will pick up.
Fiscal support should also kick in, supporting growth, it added.
(Reporting by Balazs Koranyi, editing by Ed Osmond)