FRANKFURT • Europe’s largest economy showed signs it’s still resilient as unemployment fell to a record low despite weaker business sentiment and activity across the region.
Germany’s jobless rate unexpectedly fell to 5% in November from 5.1%, and the number of people out of work slid by 16,000 compared to an estimated decline of 10,000 in a Bloomberg survey. The report backs the Bundesbank’s view that the economy is rebounding from a summer contraction, and will bolster the European Central Bank’s belief that wage pressures are mounting.
The data support the narrative that German domestic demand will continue to buoy momentum even after the auto industry faced setbacks and exporters took a hit amid trade uncertainty. Germany’s Bundesbank foresees a “fairly strong” expansion in the final three months of 2018 after a contraction in the third quarter (3Q), with private consumption as a major driver.
Still, business confidence soured in November and a Purchasing Managers’ Index signalled private-sector growth is the weakest in almost four years. Unemployment dropped by 9,000 in west Germany and by 7,000 in the eastern part The global economy headed into the final stretch of 2018 in weakened shape, and the OECD said tax cuts and a spending splurge would be needed in case of a sharp downturn because central banks have nothing left in the tank.
Earlier in the day, neighbouring Switzerland reported a surprise economic 0.2% contraction in the 3Q, in part because of a drag on trade. — Bloomberg