The Bundesbank said in its monthly report for November that rising capacity utilisation and the rise in employment "speak for a continuing favourable growth process".
Both the fundamental dynamics of the economy as well as early indicators "currently offer no cause for pessimistic perspectives", the Bundesbank report said, while conceding that oil prices had put some "sand in the economic works".
In the third quarter, Germany's gross domestic product was almost 3.5 per cent higher than that a year earlier, which was not much lower than the annual rate of the previous quarter, it noted.
The Bundesbank report also was upbeat about the overall world economic outlook, though it did concede that "shadows have fallen on the global economic picture" due to the enormous rise in energy costs.
As a result, the global growth prospects for 2001 and 2002 were not as favourable as previously seen.
"At the same time, an avoidance of internal battles over distribution (of wealth) and continued reform efforts mean that the prospects are good that the world economy will remain on a course of growth," the Bundesbank said.
The central bank experts warned unions against trying to counter rising consumer prices by means of wage battles.
During the strong oil price surges of the 1970s and early 1980s, such a response had only boosted prices further, forcing the central bank to "powerfully tighten the monetary reins", the Bundesbank said.
The monthly report said that for Germany, exports will continue to be the main pillar of the economy. Despite a slightly more subdued mood, "the constitution of the German economy is sufficiently robust", it said.
It noted that in the third quarter, western German industrial capacity utilisation had reached its highest level since the economic boom triggered by German unification in 1990.
One negative aspect of the German economic picture is weakening consumer demand. In particular, there was reduced inclination towards buying consumer durable goods, with the automobile industry above all feeling the effects, the Bundesbank report said.
(sda)