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Carsten Brzeski, chief economist at ING, notes that German unemployment increased by 59,200 in July (not seasonally adjusted), bringing the total number of unemployed up to 2.275 million, the highest level since March this year.

Key Quotes

“In seasonally-adjusted terms, unemployment increased by 1,000, keeping the seasonally-adjusted unemployment rate stable at 5.0%. It is the worst July performance of the German labour market since 2015.”

“The industrial slowdown of the last 12 months is finally leaving its mark on the domestic economy and more particularly on the labour market. Employment expectations in the manufacturing industry have already fallen sharply since the end of 2017 and are currently at their lowest level since early 2010.”

“In recent months, the service sector has also seen some signs of dampening. Employment expectations, though still at positive levels, have dropped since last August and are now at the weakest level since November 2017. Combined with an increase in short-time work schemes, yesterday’s drop in consumers’ willingness to buy did not come as a surprise.”

“All in all, the outlook for the German economy has become grimmer. 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. Today’s labour 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.”