NEWS,08.01.2013

Bumpy road for German economy - experts

More evidence of sliding German exports and industry orders on Tuesday compounded concerns that the eurozone crisis may have battered the region's largest economy into contraction at the end of last year.German imports and exports slid in November, narrowing the trade surplus, and industry orders fell more than expected.Imports slid 3.7%, while exports fell 3.4%, data from the Federal Statistics Office showed on Tuesday. Economists polled by Reuters had expected imports to increase by 0.4% and shipments abroad to drop 0.5%. Seasonally-adjusted industrial orders fell 1.8% in November, due mainly to a sharp fall in demand from non-eurozone countries. That was below a 1.4% drop forecast by a Reuters poll of 29 economists. Germany has served as a pillar of regional strength through the three-year eurozone debt crisis but the economy slowed in the third quarter of last year and economists expect it to have contracted in the last quarter. Although many see Germany escaping a recession and staging a steady improvement this year, Tuesday's data prompted some economists to predict a bumpy road." With a pick-up of global demand, exports could quickly return as the reliable growth driver. However, (the) latest new order data illustrate that the way out of contraction will not necessarily be a straight upward-sloped line," said Carsten Brzeski, senior economist at ING. Germany is unlikely to join eurozone stragglers, he added, but "could end up humming the 'things will get worse before they get better' tune still for some time."Trade surplus narrows The seasonally-adjusted trade surplus narrowed more than expected to €14.6bn from a downwardly revised 14.9bn in October. The consensus forecast in a Reuters poll was for it to narrow slightly to €15.0bn. Weakness in the European Union, where Germany sells roughly 60% of its exported goods, is weighing on exports. Sovereign debt crises have driven most of its partners to raise taxes and cut spending, weakening appetite for German goods, although demand from emerging markets has gone some way to compensating for that.A breakdown of the German trade data on an unadjusted basis showed exports to the eurozone slumped 5.7% on the year, even as exports to countries outside Europe rose 5.6%.The drop in imports raises questions about the ability of German consumers and companies to prop up growth during the eurozone crisis, as many had hoped, with unemployment on the rise and consumer morale deteriorating. Nonetheless, unemployment is close to a 20-year low and wages are rising for the first time in years. Purchasing managers' reports showed the private sector expanded for the first time in eight months in December, while the Ifo index showed morale at German businesses rising in November and December. The economy ministry played down the decline in manufacturing orders given strong October figures."Overall, demand seems to be stabilising. The slight improvement in sentiment indicators also points to this," said the ministry in a statement.Providing some reassurance about domestic demand, bookings from within Germany increased by 1.3%.However, foreign orders fell by 4.1%. While bookings from the eurozone inched up 0.2%, contracts from countries outside the currency union slumped by 6.5% after an 8% rise in October. "Demand for capital goods remains low in view of the weak economic environment in Europe, where there is significant overcapacity in many places," said Bernd Hartmann, head of investment research at VP Bank.

Eurozone jobless rate jumps to new high

Europe's unemployment numbers are rising to worrying new records with dire figures from Spain especially underlining a growing north-south divide, official data showed on Tuesday.The unemployment rate across the troubled eurozone hit 11.8% in November, up from 11.7% in October, with the number of people out of work in the 17-nation single currency area now nudging 19 million. The 19th rise in a row for the eurozone, home to some 330 million people, represented an increase of more than two million on the dole compared to a year ago. London-based IHS Global Insight analyst Howard Archer calculated the cumulative increase since April 2011 as 3.278 million out-of-work."The only crumb of comfort was that this was the smallest rise since August, although it did follow a particularly sharp rise of 220,000 in October," Archer said, adding that he expected the jobless rate to "move clearly above 12% during 2013."While the jobless numbers exceeded 26 million for the first time across the full 27-member European Union, which includes Britain and Poland, the EU as a whole recorded an unchanged 10.7-percent unemployment rate.Indeed, there were more jobless over the past year, according to Eurostat data, in the 17-nation eurozone where the number of newly unemployed was 2.015 million, compared to 2.012 million for the EU. Facing a bust property boom and riddled with bad debt in its banks, Spain recorded the highest unemployment rate of all the European countries - at 26.6%, worse even than bailed-out Greece. Among under-25s, both countries saw unemployment rates hovering around 57%.According to Eurostat figures seasonally-adjusted for comparative purposes, the November unemployment rate in key rival economies was 7.8% for the United States and 4.1% for Japan."2012 has been another very bad year for Europe in terms of unemployment and the deteriorating social situation," said European Commissioner for Employment, Social Affairs and Inclusion Laszlo Andor. Giving his annual report on employment trends, he said that "appropriate labour market reforms and improvements in the design of welfare systems" could make countries more resilient to economic shocks. But with a north-south divide between Germany and similar satellite economies faring far better than Europe's southern Mediterranean rim, Andor said it was "unlikely that Europe will see much socio-economic improvement in 2013.""A widening gap is emerging," Andor said, even between the north and south just of the eurozone. The Commission concluded there was a divergence between "countries that seem trapped in a downward spiral of falling output, fast-rising unemployment and eroding disposable incomes, and those that have so far shown good or at least some resilience."Southern and peripheral countries whose governments and companies face much higher interest rates or no access to market financing will continue to struggle, the Commission said, citing an over-allocation of lending during the construction boom of the last decade.

Italian jobless ranks swell

Italy's jobless rate remained at a record high in November while youth unemployment jumped to a new peak above 37%, data showed on Tuesday. Italy has been in a deep recession since the middle of 2011 and unemployment has risen steadily as businesses clamp down on staffing levels to cope with crumbling domestic demand. The plight of the unemployed and particularly young people will be a crunch issue at the election and outgoing Prime Minister Monti, who heads a centrist group, has been criticised by opponents on the left and right of hurting the economy in his efforts to fix public finances. Unemployment was stable in November at October's record high of 11.1%, national statistics institute ISTAT reported. Joblessness rose above 11% in October for the first time since the first quarter of 1999. Before January 2004 ISTAT only issued quarterly jobs data. November's rate was marginally below a forecast of a further rise to 11.2% in a Reuters survey of analysts, but it was up 1.8 percentage points from November 2011 when Monti was appointed to save Italy from a mounting debt crisis. The youth unemployment rate, referring to 15-24 year-olds, jumped for the third month running in November to 37.1%, its highest level since records began in 1992.Companies are reluctant to give new recruits regular contracts because strong job protection means it is hard to fire them. So young people tend to move from one temporary contract to the next, and opportunities have dried up in the recession. Monti sought to address the problem with a hotly contested labour reform passed last summer, but critics say that by making it more costly and complicated for firms to offer temporary contracts the reform discouraged hiring in the recession. "You always hope that if you put some effort in you will get something back," said 22 year-old Michele Andaloro as he lined up in search of work at one of Rome's largest job centres. "The next government needs to work for the future of young people and not behave like in the past." Analysts say the growing financial difficulties of families are also forcing more young people to look for work rather than study or live off family income. In a dismal series of records, the employment rate edged down in November to a 12-month low of 56.8%, while the male employment rate fell to 66.3%, the lowest since records began in 1992."The worst hit by the crisis are those in the industrial section and construction," an ISTAT spokesperson said.I talian industrial output is still more than 25% lower than its level of mid-2008, before the recession brought on by the global financial crisis. Analysts say the real challenge for Italy is to increase its chronically low rates of employment and participation in the labour market, which are among the lowest in the industrialised world, especially among women, the young and the elderly.