Germans are buying more bicycles and fewer cars as the country’s economic slump prompts households to cut back on expensive purchases.

In what is a further blow to Germany’s troubled automotive industry, new research shows that car sales are slowing and unlikely to improve any time soon.

That is unlike bicycle sales, however, which have seen a recent uptick in demand.

The country’s car manufacturing sector is struggling with high energy costs, weak demand from China and the consumer shift to electric vehicles.

The trend also reflects the challenge facing Chancellor Olaf Scholz, whose Social Democratic Party is under pressure from a surge in support for the far-Right ahead of next year’s general election.

According to the Ifo Institute’s survey of retailers, German households have not only cut back on car purchases over the past month but have also steered clear of goods such as furniture and clothing.

In contrast, retailers selling bicycles reported improving sales, as did grocers and shops selling consumer electronics.

Overall, retailers’ assessments of the economic situation dipped again in September, according to the influential survey, with hopes for the future also worsening.

Ifo’s Patrick Hoppner said demand was not expected to recover any time soon, and workers were likely to suffer as a result.

“Consumers are unsettled about the economic policy environment,” he explained. “That means that no further dynamic growth in private consumer spending can be expected for the rest of 2024.

“In a predominantly difficult business environment, retailers see fewer and fewer opportunities for price increases. Employment will also fall rather than rise in the short term.”

Weak demand has also led to a slump in activity across German factories. Manufacturing orders in August were down 3.9pc compared with the same month in 2023, according to the Federal Statistical Office.

It is not only export orders that are struggling, as domestic orders also fell to their lowest level since May 2020.

Compared with July, overall orders were down 5.8pc – with domestic demand plunging by more than 10pc over the month.

Jane Foley, a strategist at Rabobank, suggested that the overall economy may have shrunk again during the latest quarter. She said: “The release highlights the risk that the country may have been back in recession in the third quarter.”

It comes after Germany’s central bank recently warned that the country could be at risk of falling back into recession.