German jobless at 20 year low, retail sales dip

BERLIN: Germany's unemployment rate held at a 20-year low in June, pointing to a still buoyant labour market, but consumers spent cautiously in May, in part due to an E.coli outbreak that led to a drop in food sales.

Germany has recovered swiftly from its deepest post-war recession, outpacing euro zone peers. Stronger exports have been matched in recent months by higher domestic consumption, a picture clouded slightly by Thursday's data.

The adjusted jobless rate was 7.0 percent, seasonally adjusted Federal Labour Office figures showed, its lowest level since German reunification in 1991.

That was unchanged from May, when retail sales however fell at their fastest rate in four years, according to earlier statistics office data.

Economists said an E.coli outbreak that led to a drop in food sales was partly responsible for the 2.8 percent monthly dip, though sales stripping out food also fell.

E.COLI DAMPENER

Germany posted 1.5 percent economic growth in the first quarter of this year. Low unemployment has tracked the rebound, prompting politicians to talk of a "job miracle" though both Berlin and the Bundesbank say the pace of growth is easing.

Unemployment fell by a further 8,000 in June, though less than the 17,000 forecast in a Reuters survey, suggesting the times of heady jobs growth could be at an end.

"The times of strong (jobless) declines are behind us," said Marco Bargel at Postbank.

"Unemployment will continue to fall -- even if in small increments. That also suggests lower economic growth."

Meanwhile the E.coli crisis put a dampener on domestic spending.

Christian Schulz, an economist at Berenberg Bank, said the outbreak that has left scores dead in Germany and peaked in May was a major factor in that month's sales drop.

"The ... outbreak is probably the largest single cause for the weakness in May. Uncertainty about the exact cause for a long time (so) consumers abstained from buying fresh food."

Supermarket chain Edeka said the blip should be temporary, saying shoppers had returned to buying fresh fruit and vegetables since the crisis peaked.

Germany's overall economic prospects remain buoyant, and any slowdown in consumption has done little to slow the pace of inflation.

Munich-based think tank Ifo on Wednesday hiked its forecast for German growth to 3.3 percent this year and 2.3 percent in 2012.

Consumer inflation held above the European Central Bank's target level at 2.3 percent in June, unchanged from May.

Copyright Reuters, 2011