06:52 AM EDT, 07/07/2025 (MT Newswires) -- German industry has left the front-loading reversal behind and showed further signs of at least a cyclical rebound, said ING.

In May, industrial production (IP) increased by 1.2% month-on-month after a 1.6% drop in April. On the year, IP was up by 1%. While production in the automotive and energy sectors increased, activity in the construction sector weakened and appears to be a severe drag on the entire economy in Q2, wrote the bank in a note.

Since the start of the year, there had been promising signals from industry pointing to at least a cyclical rebound: the turning inventory cycle, stated ING. Industrial orders had finally started to improve, and inventories began to drop.

This phenomenon grew even stronger towards the end of Q1, with the United States front-loading products from Germany in anticipation of looming tariffs, pointed out ING.

According to survey data, however, the positive turn of the inventory cycle ended abruptly in June, with inventories increasing again and order positions weakening, begging the question of whether the turning inventory cycle was more a result of front-loading rather than a cyclical phenomenon, added the bank.

Looking ahead -- and with the jury still out on the turning inventory cycle -- German industry and the entire economy are still in the midst of two very different developments, noted the bank. For the nearer term, downside risks have increased on the back of ongoing trade tensions, but also the stronger euro -- which effectively acts as an additional tariff -- as well as the dry and hot summer weather, which has brought water levels in Germany's rivers to almost unprecedentedly low levels for this time of year.

Still, the fact that the German government is implementing its fiscal plans without setbacks is keeping hopes high for more investment and stronger growth in 2026 and beyond.

All in all, Monday's IP data has increased the likelihood that German industry is experiencing more than only a front-loading-driven rebound, accoridng to ING.