In a statement on Wednesday, the Federal Labour Office (BA) said that increased economic activity as autumn began had driven the fall in unemployment, which now stands at 2.7 million people.

That was 100,000 fewer than at the same time in 2014, the agency said.

A survey of managers last week by the Munich-based Ifo institute found that German businesses remained confident about the next few months.

Confidence had risen to 108.5 points on the Ifo scale (with 100 being the average result of the poll in 2005).

“The German economy is showing that it's robust… More companies are planning to increase production,” Ifo head Hans-Werner Sinn said last Thursday at the release of the report.

Headwinds threaten in months ahead

But both the BA figures and the confidence index were compiled before the Volkswagen scandal broke, shaking confidence in German business and causing financial markets to waver.

Damage to the image of the “Made in Germany” brand may only become apparent in October's figures.

As well as what is likely to be a costly recovery from the crisis for Germany's biggest carmaker, businesses also face challenges from low growth in emerging markets and continuing low interest rates.