German factory production at highest level for 18 months

German industrial production surged to its highest level in 18 months in August, according to data released by the country's statistics agency. Factory output increased by 2% month-on-month, following a 1.2% drop in July. This comes after a year and a half of relatively stagnant growth, with the auto sector experiencing a decline of over 5%, partly due to factory holidays.

The construction sector drove the growth, expanding by more than 9% in August, largely due to public contracts for infrastructure upgrades. Machinery and equipment production also rose by over 5%. However, energy-intensive industries faced challenges due to high oil prices stemming from conflicts in the Middle East. Additionally, transportation on the Rhine River, crucial to Germany's economy, was hindered by low water levels caused by heatwaves.

Despite these challenges, the economy ministry maintains that industrial activity remains subdued. Experts, including ING economist Carsten Brzeski, view the data as a positive sign, noting that Germany's economic recovery has gained momentum after a setback in July. Leading economic institutes have also revised their growth forecasts for the German economy upward, projecting a 1.3% growth for 2026.