Germany's industrial output rose for the first time in three months in July, signaling a turnaround for the sluggish manufacturing sector in Q3

According to Zhitong Finance APP, Germany's industrial output in July exceeded expectations, bringing a glimmer of hope that this key economic sector may be stabilizing and could soon emerge from years of sluggishness. Data released by the Federal Statistical Office of Germany (Destatis) on Monday showed that driven by the machinery sector, Germany's industrial output increased by 1.3% month-on-month in July. This marks the first increase since March of this year and is higher than the median expectation of 1% from a Bloomberg survey.

The statistical office also noted that the decline in Germany's industrial output in June was revised from a previously reported 1.9% to just 0.1%, "mainly due to a large enterprise in the automotive sector subsequently reporting revised data."

This data indicates that Germany's manufacturing sector has had a good start in the third quarter. Previously, the weakness in manufacturing was the main reason for the economic contraction of Europe's largest economy (Germany), with the country's Gross Domestic Product (GDP) declining by 0.3% from April to June this year.

However, in contrast to the positive data released today, last Friday's factory orders data for July unexpectedly showed a significant decline, which weakened external optimism about the manufacturing sector's ability to quickly emerge from three years of recession.

Since the outbreak of the Russia-Ukraine conflict in 2022, the pace of Germany's economic decline has accelerated. Currently, the recovery of industrial activity is seen as key to achieving sustainable economic recovery in Germany.

Last week, several research institutions downgraded Germany's economic growth forecast for 2025 to only 0.1% to 0.2%. One reason for this adjustment is the higher U.S. tariffs agreed upon by the EU and the U.S. in July, which are suppressing economic activity in Germany.

Meanwhile, economists still expect Germany's economy to rebound next year, supported by factors such as increased government public spending and interest rate cuts by the European Central Bank (ECB). Recently, business confidence in Germany has also improved.

German Chancellor Friedrich Merz stated in August that it has proven to be much more difficult to address the economic challenges currently facing Germany than he initially expected.

Currently, there is a growing call for Merz to fulfill his promises of economic growth, which also include simplifying administrative processes, reforming the labor market, and boosting domestic consumption.

Additional data shows that Germany's exports fell by 0.6% in July, while imports also shrank. Despite this, Germany still achieved a trade surplus of 14.7 billion euros (approximately 17.2 billion USD) for the month