German Unemployment Falls for Third Month as Growth Picks Up

German unemployment fell for a third month in February, declining more than economists predicted, as companies became more confident in the recovery in Europe’s largest economy.

The number of people out of work decreased by a seasonally adjusted 14,000 to 2.914 million, after falling by 28,000 the previous month, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, according to the median of 30 estimates in a Bloomberg News survey. The adjusted jobless rate was 6.8 percent, unchanged from January and at a two-decade low. Separate figures showed euro-area economic confidence unexpectedly increased.

The German economy beat economists’ expectations at the end of last year with 0.4 percent growth that also bolstered the fragile recovery in the euro area, the country’s biggest trading partner. Business confidence as measured by the Ifo research institute rose to the highest level in 2 1/2 years in February, consumer sentiment is set to rise to a seven-year high in March, and the Bundesbank predicts growth will accelerate this quarter.

“The German labor market remains robust and it benefits from the recent pickup in activity,” said Annalisa Piazza, senior fixed-income strategist at Newedge Group in London. “The labor market is set to remain a supportive factor for consumption even if employment growth doesn’t accelerate considerably near term”

Domestic Demand

The European Commission raised its growth forecasts for Germany this week, citing rising demand at home. The economy will expand 1.8 percent in 2014 and 2 percent in 2015, it predicted. That’s 0.1 percentage point higher for both years than projected in November.

The Brussels-based commission sees euro-area gross domestic product rising 1.2 percent this year, which would be its first full-year expansion in three years.

An index of executive and consumer sentiment rose to 101.2, the highest reading since July 2011, from a revised 101 in January, the commission said today. That beat the median estimate of 100.7 in a Bloomberg News survey of 31 economists.

The improvement, led by the services industry, eases pressure on the European Central Bank to take action next month to counter low inflation and spur growth. The euro dropped 0.2 percent to $1.3657 after weakening 0.4 percent yesterday, the most since Jan. 31.

‘Very Optimistic’

Joblessness fell by 8,000 in west Germany and 6,000 in the eastern part, the labor-agency report showed.

Unemployment in Germany is less than half that in the single-currency region, where the rate remained at a near-record 12 percent in December. A measure of German joblessness comparable with other euro-area countries stood at 5.1 percent in December, the second-lowest after Austria, while it was 25.8 percent in Spain.

“We are very optimistic for the German labor market,” said Matthias Thiel, an economist at M.M. Warburg & Co. in Hamburg. “We expect the unemployment rate to decline further since Germany’s economy is going to have a good year in 2014.”

HeidelbergCement AG, the world’s third-largest maker of cement, cut 750 jobs in North America and Europe in 2013 in a profit-improvement program. At the same time, BASF SE, the world’s largest chemical company, posted fourth-quarter profit that beat analyst estimates on Feb. 25.

German growth in the fourth quarter was supported by surging exports and increasing investment, while private consumption and domestic demand declined. That highlights the economy is still vulnerable to headwinds from developments in the rest of the 18-nation region. German manufacturing probably slowed in March and a gauge of investor sentiment declined in February for a second month.

Data in six German states showed monthly increases in consumer prices, though annual inflation in each slowed, indicating weakening cost pressures. Figures for Germany as a whole will be released at 2 p.m. local time. Inflation slowed to 1.1 percent in February from 1.2 percent the previous month, the median of 23 forecasts shows.

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