FRANKFURT, Aug 20 (Reuters) - The German economy could perform much better in the third quarter than in the second as the impact of local and global stimulus measures strengthens, the Bundesbank said in a monthly report on Thursday.
"Based on early indicators, a further marked increase in economic production in the third quarter is possible," the German central bank said, but added uncertainty is still high.
German economy grew 0.3 percent in the second quarter from the first.
Monetary and fiscal stimulus measures seem to have been timed well and contribute to the improved performance, the Bundesbank said.
The Bundesbank also said there were no signs of a general credit crunch in Germany.
The euro zone economy was expected stabilise further in the second half of the year, it also said.
Inflation in Germany was expected to be less negative in the next months and return to positive figures later this year, with a slightly positive inflation rate expected for the full year. German July inflation rate was -0.5 percent.
It also said current negative inflation rates in the euro zone were temporary. "They mirror above all base effects (of food and oil prices), but not a deflation risk."
Inflation was expected to return to positive figures during the autumn.
Turning to world economy, the Bundesbank said it was likely to be on the upswing already.
"World economy likely reached bottom in spring 2009," it said. "In the second half of 2009, the cyclical recovery tendencies in the global economy could become more explicit."
The better outlook reflects stimulus programmes, expansive monetary policy and measures to stabilise the financial markets, the Bundesbank said, but added the global confidence shock was not over, and this spoke against a rapid recovery in the second half of the year. (Reporting by Sakari Suoninen; Editing by Jon Boyle)