German industrial production rebounded in August, adding to signs that Europe’s largest economy is benefitting from the euro area’s recovery.

Output, adjusted for seasonal swings, rose 1.4 per cent from July, when it dropped a revised 1.1 per cent, the Economy Ministry in Berlin said today.

Production advanced 0.3 per cent from a year earlier when adjusted for working days. Germany's economy is supported by an "extraordinarily good" consumer climate, helped by a robust labour market, the Bundesbank said last month.

The euro area, the country’s biggest trading partner, is a potential source of increased demand after the 17-nation bloc emerged from its longest-ever recession.

At the same time, the recovery is uneven, with data yesterday showing German factory orders fell for a second month in August after the biggest gain in 2 1/2 years in June.

"In the short term, the prospects for German industry remain positive," said Carsten Brzeski, senior economist at ING Groep NV in Brussels.

“Industrial production should further benefit from the recent inventory reduction and the increase in new orders earlier this year. In the longer term, however, the industry needs more fuel to return to full strength.”

Bundesbank outlook

German manufacturing output gained 2.1 per cent in August, with production of investment goods surging 4.4 per cent, today’s report showed. Construction dropped 1.9 per cent, after the prior month’s 2.7 per cent gain. Energy output slid 0.2 per cent.

The Bundesbank said in its monthly bulletin on September 23rd that it sees signs the economy will improve for the rest of this year.

The Frankfurt-based central bank predicts growth of 0.3 per cent in 2013 and 1.5 per cent in 2014. Gross domestic product expanded 0.7 per cent in the three months through June after stagnating in the first quarter.

“The upward trend in industrial output continued,” the ministry said in a statement.

“The phase of weakness during the winter has been overcome. Manufacturing is on a moderate, and construction on a somewhat stronger, path of growth.”

Business confidence as measured by the Ifo research institute rose for a fifth month in September to the highest level since April 2012, ZEW investor sentiment climbed to a three-year high and GfK consumer confidence is at the strongest since 2007.

While the country’s jobless rate unexpectedly rose to 6.9 per cent last month, it remains near a two-decade low.

Bloomberg