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EMPLOYMENT

Unemployment at new post-unification low

German unemployment fell in March to the lowest level since the country reunited in 1990 as growth in Europe's biggest economy continues to pick up, official data showed on Tuesday.

Unemployment at new post-unification low
Photo: DPA

The number of people registered as unemployed in Germany fell by a seasonally-adjusted 15,000 to 2.798 million in February, the Federal Labour Office said.

The unemployment rate — which measures the jobless total against the working population as a whole — slipped to 6.4 percent in March from 6.5 percent in February, also the lowest level since west and east Germany reunited in 1990 after the fall of the Berlin Wall the previous year.

In raw or unadjusted terms, the jobless total decreased by 85,500 to 2.932 million and the jobless rate eased to 6.8 percent in March from 6.9 percent in February, the labour office said.

Normally, unemployment declines in the spring as the warmer weather allows companies in sectors such as construction to take on workers.

But the current strength of the economic recovery in Germany was magnifying that effect, the labour office said.

"The labour market developed positively both on the supply and demand side," it said.

"The employment trend remains pointing firmly upwards. And usual spring upturn that begins in March was stronger than usual," it added.

German gross domestic product (GDP) expanded by 0.7 percent in the fourth quarter of last year, fuelled primarily by consumer spending and exports, but also by construction investment.

"Early indicators point to an overall favourable development in 2015," the labour office said.

Meanwhile, other European economies such as Italy continue to struggle.

The Mediterranean country is suffering from an overall employment rate of 12.7 percent, and 42.6 percent among people aged under 25.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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