German Unemployment Drops as Economy Eases Euro-Area Burden

German August Adjusted Jobless Rate Unchanged at 6.4%
  • Rate remains at 6.4%, lowest level since reunification
  • PMI data signal manufacturing activity picked up in August

German unemployment declined in August and manufacturing gained momentum, signaling that Europe’s largest economy will continue growing.

Joblessness fell a seasonally-adjusted 7,000 to 2.79 million, the Federal Labor Agency in Nuremberg said on Tuesday, and the unemployment rate remained at 6.4 percent. A Purchasing Managers’ Index for manufacturing rose to 53.2 from 51.8 in July, well above the 50 level that indicates expansion.

German is poised for “solid” growth, supported by both external and domestic demand, the Bundesbank predicted on Aug. 17. Business confidence has improved in the past two months even as trade risks from China’s economic slowdown mount.

“The German labor market is very stable and robust,” said Johannes Gareis, an economist at Natixis SA in Frankfurt. “Amid a global economy weakened by a trailing dynamic in China, domestic consumption is more important than ever, and this is where the labor market acts as a crutch for the economy.”

Economists had predicted a drop in unemployment of 4,000. The number of people without work declined by about 3,000 in western Germany and about 3,000 in the eastern part of the country, the data show.

The jobless rate in the 19-nation euro area unexpectedly slid to 10.9 percent in July, the lowest reading since February 2012, data from the European Union’s statistics office showed on Tuesday. Economists in a Bloomberg survey had predicted it would hold at 11.1 percent.

A gauge for euro-area manufacturing eased to 52.3 in August from 52.4. Markit data show that input costs at the region’s factories fell for the first time in six months and selling prices barely grew. In a positive sign, the gauge of new orders rose to the highest in more than a year, while export demand also improved. French manufacturing contracted.

Germany is “taking on more of the growth strain,” Rob Dobson, an economist at Markit Economics in London, said in a statement. “We will have to wait and see if recent concerns regarding a slowdown in China filter through to the figures in coming months.”

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