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Financial News: German Economic Resilience Starts Weakening

German Economic Resilience Starts Weakening

07/31/2019 - 10:07:00 (RTTNews)

(RTTNews) - Germany's labor market has started to show signs of being hurt by the economic slowdown that is fueled mainly by external factors, and the weaker momentum is reflecting in household spending, suggesting that the domestic resilience in the biggest euro area economy is weakening. Unemployment grew less-than-expected in July in seasonally adjusted terms, preliminary data from the Federal Employment Agency showed on Wednesday.

The seasonally adjusted unemployment grew by 1,000 persons to 2.283 million in July. Economists had forecast an increase of 2,000. The initially reported decline of 1,000 in June was revised to show no change. The seasonally adjusted jobless rate was 5 percent for a third straight month, in line with economists' expectations. However, in non-adjusted terms, the unemployment climbed by 59,218 persons to 2.275 million and the jobless rate climbed to 5 percent from 4.9 percent. The increase was the biggest since the start of the year and the jobless total the largest since March. Underemployment was largely unchanged from the previous month in seasonally adjusted terms, and totaled 3.201 million. On an unadjusted basis, the figure rose by 33,000 from the previous month. "Unemployment and underemployment increased in July, mainly due to the onset of the summer break," Daniel Terzenbach, an official at the Federal Employment Agency said. "The demand from companies for new employees is decreasing slightly and employment is continuing to increase, but less dynamically."

Earlier on Wednesday, Destatis reported that the ILO jobless rate was stable at 3.1 percent in June.

Retail sales declined unexpectedly in June, marking the first fall in three months, data from Destatis revealed earlier on Wednesday.

Real retail sales fell 1.6 percent year-on-year in June, reversing a 3.8 percent rise in May. This was in contrast to the expected growth of 0.6 percent.

However, on a monthly basis, retail sales expanded 3.5 percent in June, offsetting the last month's 1.7 percent decrease. Economists had forecast a marginal 0.5 percent growth for June.

The outlook for the German economy has become grimmer, ING economist Carsten Brzeski said. "While there is no reason to panic and the situation is definitely not as critical as in 2009, the risk of a longer stagnation is increasing," Brzeski said. "Today's labor market data indicate that in the months ahead, private consumption will no longer be the powerful growth driver it used to be in recent years."

In June, Bundesbank said the economy is likely to shrink in the second quarter as the factors that boosted first quarter growth faded.

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