Two second half goals from Wolves’ Adama Traore proved the difference with City failing to convert pressure and territory into tangible reward.
The result left us eight points behind leaders Liverpool after the first eight games of the season going into the October international break.
Despite the setback however, the German midfielder insisted Pep Guardiola’s champions would seek to digest the lessons from today’s loss and look to bounce back with a vengeance once we return to action.
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"We are disappointed, we are sad, and we are frustrated,” said Gundogan.
“We have to admit that today wasn’t enough which is very unusual for us.
“It is what it is.
“Wolves did well in the first half with good situations and, of course, we struggled a bit to create chances and at the end it was not enough.
“It is what it is and tough to take right now – especially before the international break when you have two weeks.
“But we have to better afterwards.
"There are always chances to create something but in the last 10 15 minutes Wolves were very defensive and they physicality meant they were able to cope with our headers and the spaces was tiny so it was difficult.
“We know we are able to play and we know our qualities but we were not able to put that on the pitch today.
“That is a fact and truth and it hurts - but we have to try and do better as quickly as possible after the international break.”