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Tuesday, June 1, 2010

German Economy Surges

Bloomberg / Business Week

Unemployment falls twice as much as forecast

German unemployment fell more than twice as much as economists forecast in May as exports from Europe’s biggest economy surged, bolstering the recovery.

The number of people out of work declined a seasonally adjusted 45,000 to 3.25 million, the lowest since December 2008, the Nuremberg-based Federal Labor Agency said today. Unemployment was forecast to shrink by 17,000, according to the median of 28 estimates in a Bloomberg survey. The adjusted jobless rate fell to 7.7 percent from 7.8 percent.

“The labor market seems to turn much earlier than many had thought,” Carsten Brzeski, an economist at ING Group in Brussels, said in a note to investors. “It should only be a matter of a few months before the unemployment rate returns to its pre-crisis level.”

Demand for goods including Siemens AG turbines and Daimler AG cars in emerging economies such as China is prompting companies to add workers. While the euro area’s fiscal crisis is undermining consumer confidence in the region, it’s also providing a boost to exporters. The euro has fallen 15 percent against the dollar this year.

German exports surged 10.7 percent in March, the most in 18 years, the Federal Statistics Office said May 10. Factory orders rose 5 percent, more than three times economists’ forecast.

The euro remained lower against the dollar after the report and was down 1.5 percent to $1.2120 as of 10:38 a.m. in London. Bonds rose, with the yield on the 10-year German bund falling 6 basis points to 2.595 percent.

OECD Outlook

The Organization for Economic Cooperation and Development raised its global growth outlook on May 26 and said Germany’s economy will expand 1.9 percent in 2010 and 2.1 percent in 2011.

Still, German business confidence unexpectedly fell last month after Europe’s debt crisis rattled financial markets and fueled concerns about the future of the euro. At the same time, additional budget cuts by countries trying to reduce deficits could damp economic growth and curb European demand for German goods. Unemployment in the euro area rose to a 12-year high of 12.1 percent in April, a separate report today showed. Spain had the region’s highest rate, at 19.7 percent.

‘Spring Recovery’

The Bundesbank said on May 26 that Germany’s economy will probably grow “strongly” in the second quarter, boosted by exports, the Bundesbank said May 26. Capacity utilization among manufacturers will rise to 79.8 percent in the quarter, the highest since the final quarter of 2008, it said.

“The spring recovery in the labor market continued in May,” Labor Agency head Frank-Juergen Weise told reporters in Nuremberg today. “Current developments reflect once again a clear improvement in the most important indicators.”

Chemicals maker Lanxess AG on May 28 said the second quarter is proceeding well and reiterated its outlook for a “significant” improvement in earnings this year because of exports. The company said it will spend as much as 150 million euros ($184 million) in 2010 to expand facilities in Germany.

Airbus SAS plans to add 800 workers at its German factories this year, Hamburger Abendblatt reported May 19, citing Chief Executive Officer Thomas Enders.

While Germany’s economy shrank 4.9 percent last year, the most since World War II, the government limited the unemployment increase with incentives for companies to retain workers. Chancellor Angela Merkel’s Cabinet in April extended the job incentives program until 2012, having earlier extended it to the end of this year.

According to OECD data, Germany’s jobless rate was 7.3 percent in March. The equivalent rate in France was 10.1 percent and the U.S. rate was 9.7 percent.