July 31 (Bloomberg) -- Germany’s unemployment rate held near a two-decade low, potentially buoying support for the government before September elections, while the rate in the euro area stayed at a record high.
The number of people out of work in Germany decreased by a seasonally adjusted 7,000 to 2.93 million in July and the adjusted jobless rate was unchanged at 6.8 percent, according to the Nuremberg-based Federal Labor Agency today. The rate in the 17-nation euro area was 12.1 percent in June, unchanged from a revised figure for May, the European Union’s statistics office said in Luxembourg.
Chancellor Angela Merkel will seek a third term as German leader on Sept. 22 on the strength of shielding the euro-area’s biggest economy from the worst effects of the region’s debt crisis. Her Christian Democratic bloc has a support level of 40 percent, with the Social Democrats at 25 percent, according to a July 28 Emnid poll. Germany’s Ifo business confidence rose for a third month in July and GfK SE said consumer confidence will climb to the highest level in almost six years in August.
“We are optimistic that the condition of the labor market will stay good in coming months and perhaps even improve,” said Mario Gruppe, an economist at NordLB in Hanover. “The domestic labor market is still as solid as a rock in turbulent waters.”
The euro was little changed at $1.3262 at 1:35 p.m. in Frankfurt. The currency has risen 0.5 percent against the dollar this year. Germany’s benchmark DAX stock index was little changed at 8239.29 and has gained 8.2 percent since Dec. 31.
Merkel praised Germany’s “excellent” job situation last month as she laid out her campaign themes at a conference of Germany’s BDI industry association in Berlin. Her drive to get more women in the workplace will continue and specific industry branches must be open to paying minimum wages, she said. Her Social Democratic challenger, Peer Steinbrueck, has pledged to set a national minimum wage and raise the top income-tax rate.
The nation’s economy expanded 0.1 percent in the first quarter after a 0.7 percent contraction in the previous three months. The Federal Statistics Office will publish its initial estimate for the second quarter on Aug. 14.
“Germany’s strong labor market should underpin household spending as it reduces job insecurity and drives wage growth,” said Christian Schulz, an economist at Berenberg Bank in London. “As economic uncertainty caused by the euro crisis fades, consumption should grow and constitute a pillar of growth.”
Some German companies are still feeling the pain from the crisis and weakness outside the euro region. MAN SE, Europe’s third-largest maker of commercial vehicles, reported a 67 percent plunge in second-quarter profit yesterday, citing a “difficult” global environment.
The Bundesbank warned last week of signs of a slowdown in coming months after the economy grew “strongly” in the second quarter. German retail sales unexpectedly slid by an adjusted 1.5 percent in June from the prior month, data from the Federal Statistics Office in Wiesbaden showed today.
China, Germany’s third-biggest trading partner, had its biggest drop in exports since 2009 in June and fixed-asset investment cooled in the first half of the year. A preliminary survey of purchasing managers showed the nation’s manufacturing weakened more than estimated in July. China’s ruling Politburo pledged to stabilize growth while pressing on with economic reforms, the official Xinhua News Agency said yesterday.
“Germany as an export nation depends very much on the rest of the world,” said Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt. “As long as growth elsewhere doesn’t speed up, Germany will only grow very moderately.”
The euro-region’s jobless rate will increase to 12.4 percent in the fourth quarter and average 12.3 percent next year, according to the Bloomberg monthly survey of economists. Spain had the highest rate in June at 26.3 percent, while the region’s youth unemployment rose to 23.9 percent from 23.8 percent, today’s data showed.
“Both European leaders and the European Central Bank know that unemployment rates at these levels still pose a threat to the stability of the euro zone,” said Peter Vanden Houte, an economist at ING Bank NV in Brussels.
Michelin & Cie, Europe’s largest tiremaker, said on June 10 that it would end production of heavy-truck tires at a factory in Joue-les-Tours, about 250 kilometers (155 miles) southwest of Paris, by the end of 2015. About 730 of the plant’s 930 employees will lose their jobs.
The euro area, Germany’s biggest export market, is showing signs that it’s emerging from its longest-ever recession. While the jobless rate was unchanged, the number of people out of work in June fell by 24,000 to 19.3 million, the Eurostat data showed. That’s the first decline since April 2011.
The economy will probably grow 0.1 percent in the third quarter after stagnating in the three months through June, according to a Bloomberg News survey. Gross domestic product shrank for the six quarters through March.
Economic confidence in the region improved for a third month in July to the highest level in more than a year, the European Commission in Brussels said yesterday. Manufacturing unexpectedly expanded in the month for the first time in two years, according to a purchasing managers’ index by London-based Markit Economics on July 24.
ECB President Mario Draghi said this month that he expects a “gradual recovery by the end of the year.” The central bank predicts the 17-nation economy will shrink 0.6 percent in 2013 before growing 1.1 percent in 2014.
Euro-area inflation held steady at 1.6 percent in July after accelerating for two months, Eurostat said today. It’s the sixth straight month that the rate has been less than the ECB’s 2 percent ceiling, adding leeway for looser monetary policy to help the recovery.
ECB policy makers gather in Frankfurt tomorrow for their monthly policy decision. They left the benchmark interest rate unchanged at a record low of 0.5 percent on July 4 and Draghi said rates would stay at or below the current level for an extended period of time.
“Germany will benefit from the euro area’s emergence from recession,” said Alexander Koch, an economist at UniCredit Group in Munich. “The labor market is stable.”
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