FX.co ★ German Unemployment Logs Unexpected Fall Despite Economic Woes

Germany experienced an unexpected decline in unemployment in January, signaling strength in the labor market despite the looming threat of a recession. The Federal Labor Agency reported a decrease of 2,000 in the number of jobless individuals, which balances out the increase experienced in December. Contrary to economist predictions of a significant surge of 11,000, the unemployment rate in January remained steady at 5.8%.

Federal Employment Agency head, Andrea Nahles, underscored the stability of the labor market amidst economic frailty. As per a labor force survey, 1.37 million people were unemployed in December. The unemployment rate remained steady at 3.1% after adjusting for seasonal variations.

On the other hand, retail sales shrunk by 1.6% in real terms in December, against expectations of a 0.7% increase. This represents a decrease by 1.7% compared to the same period in 2022. In 2023, actual retail turnover decreased by 3.3% after a 0.7% drop in 2022, though it remained 1.3% above its pre-pandemic level in 2019.

The Federal Statistics Office, Destatis, also revealed a continuous downtrend in import prices towards the end of the year, largely driven by decreasing energy costs. Import prices declined by 8.5% year-on-year in December, a slightly slower pace than the 9.0% drop observed the previous month. Noted as the biggest fall since 2009, prices have been consistently declining since March 2023, primarily due to the high price increases experienced in 2022.