German industrial production rebounded sharply at the start of the third quarter. Industrial production jumped by 4.0% M/M in July, while the consensus was looking for a more moderate increase (0.5% M/M). The details show a sharp increase in manufacturing (4.5% M/M) and construction (3.2% M/M) production, while energy production dropped by 1.0% M/M. The details of the manufacturing sector show that strength was broad-based led by durable consumer goods (15.4% M/M), but also capital goods (7.5% M/M), intermediate goods (2.3% M/M) and non-durable con-sumer goods (0.1% M/M) increased in July. After the sharp slowdown in growth in the second quarter and weak business confidence indicators, this outcome is an encouraging sign suggesting that the German economy might hold up better than confidence indicators indicate, but this is unlikely to sustain.