Small rebound in German industry activity expected in September

Industrial output is expected to have increased by 0.3% mom in September, following the decline of 1.2% mom in August. This should put us on track for GDP growth of around 0.4% qoq in Q3, despite a small negative contribution from industrial production. 

The external headwinds would affect the industry negatively in Q4, forwards looking PMI indicators such as the orders to inventory ratio have pointed to continued industrial production growth in Q4, which could in fact result in a positive contribution to growth in Q4. Risks are however likely to be on the downside, due to the ongoing slowdown in China and adverse effects from the VW scandal.