LDN - Business

Jobless drop, retail sales fall paint mixed picture of German economy

[September 29, 2017] By Michelle Martin

BERLIN (Reuters) - Germany's jobless rate fell to a new record low in September and the number of unemployed people fell far more than expected but retail sales disappointed, sending mixed signals about the state of Europe's largest economy.

The unemployment rate dropped to 5.6 percent, the lowest level since reunification in 1990, after 5.7 percent in August, data on Friday from the Federal Labour Office showed. Economists polled by Reuters had expected it to hold steady.

The jobless total fell by 23,000 to 2.506 million in seasonally adjusted terms. That compared with the consensus forecast in a Reuters poll for a fall of 5,000 and was a steeper drop than that projected by even the most optimistic economist, who had expected a fall of 15,000.

"The economic cycle in Germany is moving toward its peak stage and that's giving the labor market a further boost," said Joerg Zeuner, chief economist at state development bank KfW.

An economic upturn in Europe has boosted exports and corporate investment, suggesting further rises in employment and noticeable wage rises - including beyond 2017, he said. But he added there were risks for the economy, with a further strong appreciation of the euro chief among them.

That could potentially hurt exporters in an economy traditionally propelled by exports but more recently driven by consumers who are benefiting from record employment, increased job security, rising real wages and ultra-low borrowing costs.

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People wait inside a job centre in Berlin April 1, 2008. REUTERS/Hannibal Hanschke

Other data published on Friday showed retail sales unexpectedly fell on the month in August and posted a smaller increase on the year than forecast, putting a slight dampener on hopes that a consumer-led upswing will continue at full steam.

The volatile indicator, which is often subject to revision, showed retail sales decreased by 0.4 percent on the month in real terms. That compared with the Reuters consensus forecast for a 0.5 percent rise and followed a 1.2 percent drop in July.

On the year, retail sales jumped by 2.8 percent, matching the previous month's increase but undershooting a Reuters consensus forecast for an increase of 3.2 percent.

Adding to the mixed picture, a GfK survey published on Thursday showed the cheerful mood among German shoppers had clouded unexpectedly heading into October.

Nonetheless, the outlook for the economy remains bright overall. Institutes on Thursday hiked their growth forecasts to 1.9 percent this year and 2 percent next year, while also saying Germany would have record budget surpluses over the next two years.

(Reporting by Michelle Martin; Editing by Paul Carrel and Catherine Evans)

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