Indications that the Eurozone’s largest economy could soon enter recession were boosted today after the Nuremberg based Federal Labour Agency revealed that German unemployment increased by twice as much as expected.
With demand for German exports dampened, business confidence hitting its lowest levels for over two years and companies remaining cautious when it comes to investment it appears increasingly likely that Germany could post contraction in the fourth quarter.
This view was reiterated by the nation’s central bank Bundesbank last week.
In the first quarter German GDP grew by 0.5 per cent, by the second quarter this growth had slowed to 0.3 per cent. Although expansion is expected in the third quarter industry experts feel that by the fourth quarter contraction could be a real possibility.
Economists participating in a Bloomberg News survey predicted that the number of people out of work from September would increase by 10,000 but the actual rise was a seasonally adjusted 20,000 taking the unemployment figure to 2.94 million.
The global economic slowdown and Eurozone crisis was also evident in the adjusted jobless rate, which rose for the first time in over three years. In August the figure stood at a twenty year low of 6.8. This number swung up to 6.9 per cent in September and held that level in October.
As an economist with Union Investment GmbH asserted: ‘German businesses feel a little less insecure after the ECB stepped in to save the Euro […] but the crisis hasn’t been solved yet and that’s why unemployment might continue to increase in the months to come.’
This perspective was seconded by Christian Lips, an economist with NordLB. He stated: ‘Even though the ECB’s announcement of its intention to buy government bonds has helped sentiment, there is reason for concern. The outlook for growth in Germany isn’t great and unemployment will continue to climb.’
However the number of unemployed people actually fell by 4 million in October on an unadjusted basis. Juergen Weise, head of the Federal Labour Agency argued that although these figures showed that ‘the weaker economy is leaving its mark on the labour market […] overall, the labour market is still robust and in a good shape.’
The International Monetary Fund is also predicting that the German economy will expand by 0.9 per cent in 2012, while the Eurozone’s economy will contract by 0.4 per cent.
As of 10:45 am
The Pound to Euro exchange rate is currently trading at 1.2395
The Pound to US Dollar exchange rate is currently trading at 1.6059
The Pound to Australian Dollar exchange rate is currently trading at 1.5482
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The Euro to Pound exchange rate is currently trading at 0.8064
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