German Unemployment Climbs in Sign Economic Recovery Delayed

Tuesday, 30 Apr 2013 07:20 AM

 

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German unemployment rose for a second month in April, adding to signs that Europe’s largest economy is struggling to recover from a slump at the end of last year.

The number of people out of work climbed a seasonally adjusted 4,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said. Economists predicted an increase of 2,000, according to the median of 29 estimates in a Bloomberg News survey. The adjusted jobless rate held at 6.9 percent, just above a two-decade low of 6.8 percent.

The International Monetary Fund predicts the German economy will expand of 0.6 percent this year, even as its biggest export market, the euro area, remains mired in recession. German business and investor confidence dropped in April as Europe’s debt crisis and an unusually long winter delayed the first-quarter rebound predicted by the Bundesbank.

“Uncertainty in the euro area is back and it has taken its toll on the German labor market,” said David Milleker, chief economist at Union Investment GmbH in Frankfurt. “I wouldn’t expect a reduction of unemployment anytime soon.”

Interest Rates

The European Central Bank predicts the 17-nation euro economy will shrink 0.5 percent this year before expanding 1 percent in 2014. Policy makers have signalled they are considering cutting interest rates to fresh historic lows in an effort to stimulate growth. They are due to meet on May 2.

Recent economic data “put at risk the ECB’s scenario of a stabilization in euro-area growth, especially in the core countries,” said Evelyn Herrmann, an economist at BNP Paribas SA in London. “This supports our view that the ECB will react with a rate cut on Thursday.”

Euro-area economic confidence fell more than forecast in April and inflation in Germany dropped to the lowest in more than two years.

MAN SE, Europe’s third-largest maker of commercial vehicles, last week lowered its earnings forecast for 2013 as a drop in its home region’s truck market and extra costs on a power-plant project led to a first-quarter loss.

Still, low unemployment and rising wages are encouraging households to spend. Consumer confidence will climb to the highest in more than 5 1/2 years next month, market research company GfK AG predicted.

Some companies are also tapping faster growing markets abroad to offset weakness at home.

Germany’s Robert Bosch GmbH, Europe’s biggest car-parts maker, said on April 18 that 2013 sales will increase as much as 4 percent, driven by growth outside the region.

“Compared to the rest of Europe, Germany’s economy and its labor market are still quite solid,” said Peter Leonhardt, an economist at Dekabank in Frankfurt. “Even though the economy is moving sideways at the moment, it will recover at some point, probably this summer.”

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