By Ralph Atkins in Frankfurt
Germany has reported its first rise in unemployment since early last year in the latest sign that Europe?s largest economy has hit a weak patch.
Seasonally-adjusted unemployment rose by 10,000 in October to 2.94m – the first rise since February 2010. The unexpected increase interrupted a steadily falling trend seen for more than two years, which has taken unemployment to the lowest levels seen since pan German figures were first compiled in the early 1990s. The unemployment rate rose to 7 per cent of the workforce, from 6.9 per cent in September.
Analysts said the latest figures may not signal a turning point, however. September?s rise was modest and business surveys show companies, many of which have a backlog of orders, still intended to increase employment in coming months. ?So far, the labour market situation still looks favourable,? wrote Alexander Koch, economist at Unicredit in a research note.
Although Germany?s economy is thought to have seen robust growth in the third quarter – gross domestic product data are released later this month – the final three months of the year are expected to see a sharp deceleration.
Germany?s manufacturing sector purchasing managers? index fell from 50.3 in September to 49.1 in October, according to revised data on Wednesday. With the 50 level marking the boundary between an expansion and contraction in activity, it pointed to a decline in activity for the first time in more than two years.
However, Germany could still avoid a recession – defined as two quarters of negative growth. The VDMA engineering association on Wednesday said demand for the sector?s products, which has largely powered Germany?s recovery over the past two years, had slowed further in September, when orders were just 1 per cent higher than a year before. But Ralph Weichers, the VDMA?s chief economist, said: ?Even in the eurozone-debt crisis-hit month of September, there was no sharp reversal. The sector continues to grow.?
? The Financial Times Limited 2011