German economic growth remained subdued in the first quarter, dragged down by weak industrial production.
The economy is also hampered by falling export demand for cars and deteriorating manufacturing sentiment, the Bundesbank said in a monthly report on Monday.
Struggling with unexpected weakness among its car manufacturers, Germany barely escaped a recession last quarter.
Fresh indicators suggest any recovery will be slow, at best, a drag on growth across the entire euro zone.
Car manufacturing suffered this quarter from a strike at a key engine plant, but a drop in export orders from outside the euro zone suggests deeper issues, rather than one-off factors, as has been suggested earlier.
“Manufacturing sector could therefore drag down overall economic growth for the third straight quarter,” the Bundesbank said in a regular monthly economic report.
Still, a boom in construction and buoyant private consumption should support the economy during the first quarter, the bank said, noting that employment continues to rise, despite the growth weakness.
“Private consumption, as signalled by the strong increase in retail sales, could pick up again significantly,” the Bundesbank said.