Germany provided a rare ray of light in the eurozone gloom on Wednesday, with record low unemployment and surprisingly good retail data showing Europe’s top economy is holding up well in the crisis.
Germany’s unemployment rate fell to 6.4 percent in November, its lowest level since reunification more than two decades ago, with the number of people out of work declining much faster than economists had expected.
“The German labour market is benefiting from the good economic trend until now. In November, there was no clouding over,” saidHeinrich Alt from the federal labour agency.
“Unemployment is going down, employment is still rising and the demand for labour has also increased,” added Alt.
Last week, a disappointing bond auction in Germany fuelled fears that the eurozone debt crisis was seeping from the edges of the bloc to the core.
Markets were concerned that if European powerhouse Germany was having difficulty selling its bonds, then there was little hope for the likes of Italy and Spain.
However, despite a flood of doom-and-gloom headlines from around Europe, Germany continues to show resilience.
The optimistic labour minister said there were “no signs” of a downturn in Europe’s powerhouse economy.
“Quite the opposite: firms’ order books are full. There is demand around the world for German goods despite the euro crisis and a poor outlook. Businesses and consumers are expecting a good Christmas,” said Ursula von der Leyen.
Analysts also cheered the news but warned that unemployment was a lagging indicator and jobless lines were likely to grow once the effects of the crisis have had more time to feed through into the real economy.
“We think that the positive trend on the German labour market will not go on for ever. The economic problems in the eurozone will eventually have a negative impact in Germany with a bit of a time lag,” said Thilo Heidrich from Postbank.
Christian Schulz, an analyst at Berenberg bank, said however that Germany’s strong labour market could have an unexpected positive effect on the jobless lines in other struggling eurozone economies.
“Anecdotal evidence suggests that German companies are already targeting unemployed engineers in southern European countries with their recruitment efforts,” said Schulz.
Nevertheless, figures published by the EU statistics office later on Wednesday showed that unemployment in the 17-nation bloc hit an all-time high of 10.3 percent in October.
While most analysts cautioned that unemployment was a so-called lagging indicator, a more forward-looking survey of retail sales also surprised to the upside, suggesting the German consumer is still spending during the crisis.
Sales edged up by 0.7 percent in October compared to the previous month, while analysts had expected no change.
“It looks as if German consumers have found their own therapy to cope with the debt crisis trauma: comfort shopping under the Christmas tree,” commented Carsten Brzeski, an economist at ING bank.
On the domestic front, both the closely watched Ifo index of business confidence and the GFK survey of consumer confidence rose this month.
And foreign demand for goods “made in Germany” is expected to hold up even during the crisis, the German Exporters Association (BGA) said on Tuesday, seeing six-percent growth in 2012 after a stellar 12 percent this year.
“The German consumers seem to be less impressed by the debt crisis than widely assumed,” said Peter Kaidusch from Natixis bank.
Nonetheless, some experts warned that not even Germany could resist the effects of a serious meltdown in the eurozone.
“Of course, in the case of a stronger-than-expected downturn of the global economy, the labour market and also household spending would not get away unscathed,” said Alexander Koch, an analyst at Unicredit bank.
“But in the short term the outlook remains favorable.”