German industrial output rises 2.0% in August, strongest gain since early 2025

August rebound contrasts with sharp drop in factory orders

Germany’s industrial output rose 2.0% in August from a 1.2% fall in July, the country’s Federal Statistical Office, known as Destatis, said Wednesday. The monthly increase was the strongest since March 2025 and far exceeded the 0.5% rise economists polled by The Wall Street Journal had forecast. Overall production was up 2.3% compared with August 2025.

The rebound was driven primarily by construction output, with mechanical equipment manufacturing also increasing. Car production declined on the month, though Destatis attributed part of that drop to factory holidays.

Output has mostly picked up since April as manufacturers stockpiled inventory amid concerns about the war in the Middle East, the report said. Some German producers also gained an advantage from disruptions to raw-material supplies from the Gulf to chemical companies based in Asia. The rebound reflected manufacturing firms’ continued response to volatile energy prices, the report added.

The August output data came in the same week that factory-orders figures published Tuesday showed German orders plummeted. The decline was driven by a large drop in big-ticket orders such as planes and military vehicles, each worth more than 50 million euros, or about $56 million. Such large-scale orders had been growing recently due to increased government contracts for defense equipment.

Germany’s economy expanded solidly in the first half of the year, propelled by unexpectedly strong demand for its goods exports. The government’s fiscal stimulus package, directing hundreds of millions of euros into defense and infrastructure investments, continues to feed through into the economy.

The European Central Bank raised its key interest rate for the second time this year last month, judging the surge in oil and gas prices to be too strong to ignore. Brent crude on Wednesday hovered above $100 a barrel.

Business sentiment in Germany climbed in September to a more-than-three-year high, indicating that firms appear to be shrugging off economic turbulence caused by the war in the Middle East. Households, by contrast, are less buoyant — consumer sentiment fell to a five-month low.

Germany’s industry continues to struggle with competition from China that has crimped demand for its goods, the report said. Volkswagen has said it would cut tens of thousands of positions as part of a critical strategic review.