Bundesbank expects German economy to grow strongly in Q4/Q1
FRANKFURT Dec 16 (Reuters) - Germany's Bundesbank expects Europe's largest economy to expand strongly over the next couple of months, helped by a rebound in manufacturing, such as the auto industry, and brightening consumer and business sentiment.
It raised concern, however, that planned financial transactions tax could hurt bank lending.
The Bundesbank raised its growth forecasts for this year and next earlier in December and said in its monthly report published on Monday that it expects industrial production, car manufacturing in specific, to pick up.
"Despite a cautious start to the final quarter (of the year), it can be expected that the German economy will expand strongly in the winter half year 2013/2014," it said.
The German economy, which has outpaced euro zone peers throughout much of the debt crisis, bounced back in the second quarter of this year, but posted slower albeit solid growth in the third quarter.
A survey showed on Monday that an upturn among Germany's export-oriented manufacturers drove a solid expansion in its private sector in December.
Production at German carmakers, for example, is picking up thanks to growing demand from the United States and China.
Volkswagen has introduced extra shifts to meet demand for its seventh-generation Golf hatchback, while Mercedes has shortened the Christmas break at some plants.
German business morale surged to its strongest in a year and a half in November, while investor sentiment is at its highest in four years.
Separately, the Bundesbank raised concern that a planned financial transaction tax could hurt the repo market - a source of funding for banks in which a borrower offers collateral, usually government bonds, as security against a cash loan.
"A foreseeable consequence would be a stronger refinancing of banks through the Eurosystem. This would not be desirable from a monetary policy and regulatory point of view," the Bundesbank said. (Reporting by Eva Taylor Editing by Jeremy Gaunt)
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