German manufacturing woes continue to keep unemployment rate high

Germany’s unemployment rate came in at 6.2% in February, which was in line with expectations, as well as being the same as in January, according to official data from the Bundesagentur für Arbeit.

February’s figure also stayed at the highest level since October 2020. The number of people without jobs hit 2.9 million, a rise of 5,000, which was less than analyst expectations of a 15,000 increase. 

Germany has faced increasing job losses in the manufacturing sector in recent years, since the start of the pandemic. Europe’s largest economy continues to struggle with weakening demand and a dampened economic outlook. 

This has mainly been because of higher energy costs, as well as growing pressure from Chinese competitors. Ongoing high inflation and interest rates have also led to wavering consumer confidence.

The country faces increasing risks of deindustrialisation, with several industrial groups choosing to relocate overseas, in search of more investors, increased liquidity and more business opportunities.  

German retail sales look up slightly – driven by food sales

The German month-on-month retail sales for January inched up 0.2%, bouncing back from a 1.6% fall in December, according to official figures from the Federal Statistical Office.

This was ahead of analyst expectations of no change. The boost was mainly because of food sales inching 1.5% higher, although non-food retail sales dropped 0.2%, with mail-order sales and e-commerce also plummeting 4.2%. 

Retail sales advanced 2.9% on an annual basis in January, inching up from a 2.8% growth in December.

This was primarily because of food sales rising 1.5%, along with non-food sales increasing 3.7%.

Internet sales also experienced robust growth, jumping 11.5%, as online demand surged. 

German economy lags in last quarter of 2024

German gross domestic product (GDP) dropped 0.2% quarter-on-quarter in the last quarter of 2024, according to final estimates by the Federal Statistical Office.

This was down from a 0.1% growth in the previous quarter, and was in line with market expectations. The fall was mainly because of drops in net trade, with exports declining 2.2%, although imports inched up 0.5%.

Household consumption growth also lagged in the fourth quarter, coming in at 0.1%, down from 0.2% in the previous quarter. 

Government spending came in at 0.4%, a marked decrease from 1.5% in the previous quarter.

However, fixed investments bounced back, coming in at 0.4% in the fourth quarter of 2024, up from -0.5% in the last quarter, mainly boosted by advancements in construction investment. The forestry, agriculture and fishing sector also decreased, along with manufacturing. 

German GDP dropped -0.2% on an annual basis in Q4 2024, which was up from -0.3% in the previous quarter and was in line with market consensus.