German industry defies higher energy prices and low water levels – for now
Per the full note from ING, German industrial production rose 0.7% m/m in September, following a 2.0% gain in August, but the desk frames this as a post-holiday bounce in autos and construction rather than a durable inflection. The critical tell is the quarterly profile: industrial output actually fell in Q3 versus Q2, confirming that the momentum of the spring has faded. ING still flags moderate near-term growth given yesterday's rise in new orders and a slight inventory drawdown, but the structural headwinds — high energy prices, elevated interest rates, and Chinese competition — remain fully intact. With no tracked currency pair attached to this commentary, our internal coverage bundle is empty and no consensus target applies. The calendar is likewise clear of high-impact German or euro-area events over the next 30 days, so the read-through is squarely a growth-impulse signal for the euro rather than an event-driven trade.
What the desk is arguing
ING's thesis is that September's German industrial production print is a post-summer rebound, not evidence of a lasting improvement. The desk is explicit that the 0.7% m/m gain — following a 2.0% rise in August — was driven by a holiday-reversal surge in automotive and construction activity, both of which continue to face structural headwinds from Chinese competition and higher interest rates.
The supporting evidence cuts both ways. On the positive side, production was 0.4% higher year-on-year and has now grown for two consecutive months, and yesterday's increase in new orders alongside a slight drop in inventories points to moderate industrial production growth in the nearer term. But the damning detail is the quarterly arithmetic: compared with Q2, industrial production actually dropped in Q3, which the desk says strengthens the warning that past success is no guarantee of future success.
The alternative read — that Germany is turning a corner on supply-chain resilience — is implicitly rejected. ING concedes that Middle East war-related disruptions and low summer water levels did less harm than feared, but frames that as a bullet dodged rather than a structural improvement. The long list of downside risks — high energy prices and higher interest rates chief among them — is unchanged.
How other firms see it
With no tracked currency pair and no per-firm targets in our coverage bundle, there is no cross-firm spread to map this against. The relevant transmission channel for our readers is the euro area growth impulse and its intersection with the ECB rate path, since a fading German industrial cycle is a dovish input for the single currency.
Watch EUR/USD and EUR/CHF for spillover, alongside German Ifo and euro-area PMI prints that will test whether the September bounce extends into Q4. The ECB deposit rate trajectory remains the dominant macro variable that any German growth surprise will feed into.
What the calendar says
No high-impact German or euro-area events sit on the calendar over the next 30 days for this jurisdiction, so there is no near-term catalyst to force a repricing of this read. That makes the next German industrial production and Ifo releases the natural test of whether ING's 'post-holiday bounce' framing holds.
Key takeaways
- 01German industrial production rose 0.7% m/m in September, following 2.0% in August, but was only 0.4% higher year-on-year.
- 02Q3 industrial production fell versus Q2 — ING flags this as the key evidence that momentum has faded.
- 03Autos and construction drove the September gain; both still face Chinese competition and higher interest rate headwinds.
- 04New orders rose and inventories fell slightly, supporting moderate near-term production growth per ING.
- 05No tracked currency pair or high-impact calendar event — the read-through is a euro growth-impulse signal only.
Market implications
A fading German industrial cycle is a modest dovish input for the euro, so watch EUR/USD for any drift lower if upcoming Ifo and PMI prints confirm the Q3 weakness. With no high-impact calendar events in the next 30 days, positioning will be driven by the next German industrial production and new orders releases rather than event risk.
Risks to this view
The call is invalidated if German industrial production delivers a third consecutive monthly gain and new orders accelerate, suggesting the September print was more than a holiday reversal. A sharp fall in energy prices or an ECB pivot toward easing that lowers financing costs would also challenge the 'structural headwinds intact' framing and force a reassessment of the euro growth impulse.
Older quick take Quick take Published 07:15 Germany Translate German industry defies higher energy prices and low water levels – for now Activity in the automotive and construction sectors experienced a post-holiday surge in September, adding to the resilience of German industry Still holding up. Despite higher energy prices and low summer water levels, German industrial production has remained resilient, growing for the second month in a row. In September, industrial production rose by 0.7% month-on-month, following a 2.0% increase in August, and was 0.4% higher than a year earlier.
The September increase seems to be a post-summer rebound, as production in the automotive and construction sectors surged. Both sectors continue to face structural headwinds, whether from Chinese competition or higher interest rates. For now, September’s strength is therefore better seen as a post-holiday bounce rather than evidence of a lasting improvement in German industry.
Nevertheless, today’s numbers illustrate that, at least up to now, supply chain disruptions on the back of the war in the Middle East and low water levels this summer have done less harm to German industry than feared. However, past success is no guarantee of future success. The fact that, compared with the second quarter, industrial production actually dropped in the third quarter strengthens this warning.
Let’s also not forget that there still is a long list of potential downside risks for German industry, the main ones being high energy prices and higher interest rates. Yesterday’s increase in new orders and the slight drop in inventories, however, still point to moderate industrial production growth in the nearer term. All in all, this morning’s industrial production data is both a sign of strength and weakness.
Of strength, as industry defied some severe headwinds in the third quarter, but also weakness, as the momentum of the second quarter has clearly faded. It’s a gradual rebound but still a far cry from being a substantial recovery. Industrial Production Germany GDP Eurozone Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Carsten Brzeski Global Head of Macro Older quick take
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