German economic growth is continuing on an upward path, according to a projection by the Bundesbank.

“Its main driver is buoyant domestic demand, which is being bolstered by the favourable situation in the labour market and by rising household income,” said Bundesbank President Jens Weidmann

However, the favourable setting for household consumption will be slightly less favourable in the years ahead and employment could grow less dynamically as a result of demographic change, whereby the pool of people available to work would shrink. Rising energy prices will also reduce consumers’ purchasing power.

In addition, foreign business will continue to be held back by muted growth in global trade next year, but it should pick up speed as the markets for German exports improve.