German Joblessness Falls More Than Forecast as Economy Grows (1)
Bloomberg News
German unemployment declined more than forecast in January as companies grew more confident in the strength of Europe's largest economy.
The number of people out of work decreased by a seasonally-adjusted 28,000 to 2.93 million, after falling a revised 19,000 in December, the Nuremberg-based Federal Labor Agency said today. Economists predicted a drop of 5,000, according to the median of 34 estimates in a Bloomberg News survey. The adjusted jobless rate unexpectedly fell to 6.8 percent, unchanged from a revised December figure and matching the lowest rate in at least two decades.
The Bundesbank predicts that Germany's economy will expand 'strongly' in the coming months, supporting the still-frail recovery in the rest of 18-nation euro area. The Ifo index of business confidence in the country is at the highest level in 2 1/2 years as businesses benefit from strengthening domestic demand and foreign trade.
'German companies might expect increasing profitability in the future, stepping up with some new hirings,' said Annalisa Piazza, a fixed-income strategist at Newedge Group in London. 'Part of the improvement in the labor market is due to the positive effects of the German structural reforms implemented ahead of the crisis. Those have helped to create a more resilient and more flexible labor market that is not affected much by cyclical swings.'
Accelerating Growth
Joblessness fell by 16,000 in west Germany and 12,000 in the eastern part, the labor-agency report showed.
Germany's DAX (DAX) stock index was down 0.4 percent at 9,302 at 10:30 a.m. Frankfurt time. The euro slid 0.4 percent $1.361.
Recent data indicate that German growth is accelerating. Manufacturing probably expanded for a seventh month in January, and GfK SE's gauge of consumer confidence is at the highest level since Aug. 2007.
Siemens AG (SIE), Europe's largest engineering company, reported first-quarter earnings on Jan. 28 that beat analyst estimates and Continental AG (CON), the continent's second-largest auto-parts maker, said this month that it foresees a fifth consecutive year of record sales.
Credit Standards
The German economy could still face headwinds from the fragile recovery in the rest of the currency bloc, where unemployment is at a record 12.1 percent. The country's gross domestic product probably grew by about a quarter of a percent last quarter compared with 0.3 percent in the prior three months, the Federal Statistics Office said Jan. 15. Investor confidence unexpectedly declined this month from a seven-year high.
A lending survey published by the European Central Bank today signaled that regulatory and supervisory pressures will weigh on credit standards and margins for loans to enterprises by euro-area banks. Overall, the region's lenders said they expect to end the tightening of credit standards for businesses this quarter, and will accelerate the easing of standards to households.
'There is a positive sentiment within the German economy but there are also positive effects from the outside as the euro area is picking up,' Daniel Lenz, an economist at DZ Bank AG in Frankfurt, said before today's reports. 'This will have a positive effect on export industries.'
To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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