FRANKFURT/Reuters – Germany’s economy may have shrunk in the fourth quarter, as supply bottlenecks hampered manufacturing and increased coronavirus concerns led to a drop in consumption. According to the Bundesbank in a Monday monthly report, this was likely.

Europe’s most important economy saw its growth slow in autumn due to shipping bottlenecks, supply shortages and a large industrial sector. Consumption however held steady.

Fears about Omicron, which caused household consumption to plummet late in the year, forced businesses and individuals to tighten their activity restrictions.

According to the Bundesbank, “The changes in behaviours and the triggered containment steps in some cases had an important impact on the economic activity of the service sector in December,”

“Germany’s gross domestic product (real) is expected to be slightly lower in the fourth quarter 2021.”

However, the outlook for 2019 looks brighter after strong factory output growth and alleviating supply bottlenecks pushed manufacturing activity to its highest level in five months in January. Separate data was released Monday.

The Bundesbank warned however that inflation prospects could take longer to improve due to high energy prices and delivery bottlenecks.

German inflation reached 5.7% during December. The Bundesbank views it as higher than the European Central Bank’s target of 2% at most through 2024.