FRANKFURT?Europe's largest economy is expected to gain speed at the end of the year, as strong industry and consumer spending should lift the country out of a summer lull, Germany's central bank said Monday.

The Deutsche Bundesbank pointed to strong industry data, such as sentiment and capacity utilization, as signals that Germany would regain momentum after lackluster quarterly growth of only 0.2% in the third quarter. This followed growth of 0.7% in the first quarter and 0.4% in the second.

"In the final quarter of 2016, growth in the German economy is likely to pick up again considerably after the temporary slowdown in the third quarter," said the Bundesbank in its monthly bulletin. "Sentiment has recently brightenedsignificantly," the bank said, noting that this was especially the case in manufacturing, "in which there was also continued clear growth in capacity utilisation and a rise in order intake."

In its preliminary growth estimate last week, the country's statistics office said that while private consumption contributed to growth, capital investments were a drag on growth. The Bundesbank, however, signaled that the trend here could reverse.

"High capacity utilisation is likely to stimulate the previously declining level of investment in machinery and equipment." In addition, the domestic economy remains in good shape. "The ongoing favourable income and labor market prospects combined with healthy consumer sentiment also suggest a distinct increase in private consumption expenditure."

German retailers are expecting a banner Christmas season. The country's retail association HDE said earlier in November that it expected nominal Christmas sales to grow by nearly 4% in annual terms.

Private economists last week said they expected the German economy to grow at a faster pace in the fourth quarter than in the third but warned that protectionist policies from U.S. President-elect Donald Trump could weigh on growth over the longer term.

Germany's statistics office will issue a more detailed analysis of third-quarter growth on Nov. 24th.

Write to Todd Buell at todd.buell@wsj.com

(END) Dow Jones Newswires

November 21, 2016 06:25 ET (11:25 GMT)

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