Germany's manufacturing sector showed signs of resilience in May 2025, with production rebounding by 1.2 percent compared to April, reversing the revised 1.6 percent decline seen the previous month. Year-over-year, production was 1.2 percent higher. The surge was driven largely by the automotive industry (4.9 percent) and a remarkable boost in energy production (10.8 percent), while pharmaceuticals also contributed strongly with a 10.0 percent rise. However, the construction sector dragged on overall growth with a 3.9 percent drop.

When excluding energy and construction, core industrial production rose by 1.4 percent, with capital goods leading the way (4.1 percent), followed by consumer goods (0.5 percent). Nonetheless, intermediate goods production fell by 2.1 percent, reflecting lingering supply chain bottlenecks or weaker demand in upstream sectors.

A concerning trend is the continued contraction in energy-intensive industries, which declined by 1.8 percent in May alone and stood 4.8 percent below their May 2024 levels. This suggests that elevated energy costs or structural shifts in energy policy are weighing heavily on these segments.

Overall, the sector is showing a tentative recovery, but the uneven performance across sub-sectors points to fragility and the need for policy support to sustain momentum. The latest update takes the RPI to minus 9, and the RPI-P to 3, meaning that economic activities are within the expectations of the German economy.

Output is expected to fall again by 0.5 percent in May after dropping by 1.4 percent in April. On year, output is seen down 0.8 percent after a 2.0 percent drop in April.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.