German economy hampered by depleted rivers, Bundesbank says

FRANKFURT, Aug 20 (Reuters) - Depleted German rivers are disrupting the transport of goods across Europe's largest economy, hampering an already timid recovery, the Bundesbank said on Thursday.

Months of dry weather have left the Rhine and other German rivers so shallow that vessels can't sail fully loaded, increasing costs and slowing transport for cargo owners.

The Bundesbank said this was likely to slow down the recovery of the German economy, which would at best grow slightly this quarter.

"Limited usable transport routes on major rivers and sharply rising transport costs are likely to significantly impair industrial production and export growth," the Bundesbank added in its monthly report. "The low water levels are thus also noticeably impacting overall economic activity in the third quarter."

It noted still low capacity utilization in German industry and the recent rise in the European Central Bank's interest rates were also dampening corporate investment.

The German central bank said inflation, which was at 2.8% in July, could temporarily rise even further, although the outlook remained dependent on the Middle East war.

But it cautioned that there was no evidence that the conflict would trigger second-round effects on the inflation rate through higher negotiated wages.

(Reporting by Francesco Canepa; Editing by Toby Chopra)