BERLIN (Reuters) — Germany's unemployment rate remained at a record low in May, data showed on Tuesday, in a further sign that private consumption will propel growth in Europe's largest economy this year.
That was in line with the consensus forecast in a Reuters poll and was the lowest since German reunification in 1990.
Data from the Labour Office showed the number of people out of work decreased by 6,000 on a seasonally-adjusted basis to 2.786 million. That drop was slightly smaller than the 10,000 fall forecast in a Reuters poll.
"The demand for workers rose to a new all-time high in May and the number of employees is rising in almost every sector. I think we'll see that continue in the coming months," said Joerg Zeuner, chief economist at KfW state development bank.
"But the manufacturing sector is only increasing its staffing levels slightly because current growth is largely being driven by the domestic economy," he added.
Data from the Statistics Office earlier on Tuesday showed seasonally-adjusted employment hit a record high in April and that, combined with other data, suggests private consumption will provide strong growth impetus this year.
A recent survey showed German consumers are feeling more optimistic than at any point since October 2001 as they benefit from hefty wage hikes, low inflation and high employment while low interest rates discourage them from saving.
Domestic demand drove 0.3 per cent growth in early 2015 but that was a marked slowdown from the 0.7 per cent growth Germany achieved in late 2014, with foreign trade largely to blame.
Private consumption has overtaken exports as Germany's main growth engine and the government is banking on household spending to help the economy expand by 1.8 per cent this year.
But not everyone is so optimistic. On Monday, economists at Deutsche Bank lowered their 2015 growth forecast for Germany to 1.6 per cent from 2.0 per cent due to the weaker-than-expected first-quarter growth.
In addition, recent sentiment surveys have shown business morale weakening and investor sentiment deteriorating.
While unemployment remains high in other parts of the euro zone, there are some signs of slight improvement, with data on Tuesday showing that the number of Spaniards registered as jobless fell by 2.7 per cent in May from a month earlier.
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