German industrial output rose 2.0% in August, mainly from construction

German industrial production rose 2.0% in August from July, the Federal Statistical Office said on Wednesday in an early reading, against the 0.5% gain economists had expected. It was the strongest monthly rise since March 2025, and it more than offset a revised 1.2% fall in July.

Germany counts construction in industrial production. The euro-area index leaves construction out, so a jump in building work shows up in Germany's number.

Construction output rose 9.3%. The office said that increase was the main reason for the overall gain. The economy ministry said public contracts to upgrade infrastructure were supporting construction.

Production excluding energy and construction rose only 0.6% on the month, and it was down 0.4% from a year earlier. Total production was up 2.3% on the year.

The economy ministry called the overall result "surprisingly strong." It also said industrial activity remains subdued.

August's strength was construction. Production excluding energy and construction is still down on the year. Over the three months through August, total production was 0.4% higher than in the three months before.

Machinery and equipment rose 5.3%, while car production fell 5.4%. The office said the car decline was partly due to factory holidays. Citing the German auto industry association, it said those shutdowns were concentrated more in August this year than last year.

The car figure is already adjusted for the time of year. That shift in when the plants closed is not fully removed by the adjustment.

Factories that use a lot of energy saw production fall 0.5% on the month. The ministry said they were struggling with a surge in oil prices triggered by conflicts in the Middle East, and that low water after heatwaves was still restricting shipping on the Rhine.

"This comes as a major surprise," said Thomas Gitzel, chief economist at VP Bank. "Given the low water levels on German rivers and the resulting negative impact on supply chains, a decline in production could not have been ruled out."

He said a catch-up at car plants is likely in September, and that could lift production again.

Large contracts explain the month, not the trend

Manufacturing orders fell 10.6% in August, the office said on Tuesday. Almost all of that drop was in other transport equipment, including aircraft, ships, trains and military vehicles, where orders fell 61.5% after unusually large contracts in July.

Large-scale orders can come from any branch, not only transport. With all of them excluded, manufacturing orders were down 0.1% on the month.

Over the three months through August, total orders were 1.3% higher than in the three months before. Without large-scale orders, they were 2.6% lower. That steadier reading shows demand falling.

Commerzbank economist Ralph Solveen said that, unlike the orders data, the production figures at least offer hope that manufacturing did not shrink in the July-to-September quarter, and that the economy grew a little.