Heraldo de Madrid - Germany factory production at highest level for 18 months

Factory output rose by two percent month-on-month on the back of strong growth in the construction sector, after a 1.2-percent fall in July, according to provisional data from statistics agency Destatis.

Analysts surveyed by financial data firm FactSet had forecast a slight decline.

It is the latest evidence that Europe's biggest economy is gaining strength after several years of stagnation, boosted by a public spending blitz.

The economy ministry said in a statement that output had come in "surprisingly strong".

Production in the construction sector, which expanded over nine percent in August, was being supported by public contracts for upgrading infrastructure, it noted.

Production of machinery and equipment also rose over five percent in August, Destatis said.

There was a decline of over five percent in the struggling auto sector, although the agency said this was partly due to factory holidays.

But industrial activity overall "remains subdued", said the economy ministry said.

Energy-intensive industries were struggling due to the surge in oil prices triggered by conflicts in the Middle East while shipping on the Rhine river, a key economic artery, was still restricted due to low water levels caused by heatwaves, it said.

Nevertheless, ING economist Carsten Brzeski said that the data pointed a positive picture overall.

"After a setback in July, Germany's cyclical rebound gained new momentum in August," he said.

Leading economic institutes recently upgraded their growth forecasts for the Germany economy for 2026 to 1.3 percent, saying it had weathered the fallout from the Iran war better than feared.

N.Carrasco--HdM