Germany Continues its Slide

These days there is little post christmas cheer from Germany. The more data we receive the more the double-dip looks like a done deal. Today's new unemployment figures revealthat seasonally adjusted unemployment rose 28,000 to 4.19m in December, a fresh four-year high. The number of Germans looking for work at the end of last year rose by 200,000 on an unadjusted basis to 4.22m, the strongest monthly increase since 1997. At the same time gloomy trading statements from two of Germany's leading retailers today confirmed fears that the sector, which registered its biggest contraction in five decades last year, could be heading for an equally difficult time in 2003.The 2002 turnover figures from Metro, the country's largest retail group, and Douglas, a perfume, jewellery, and book seller, also added to anecdotal evidence of poor Christmas sales after official statistics this week showed a steep drop in November consumption.

The Nuremberg-based Federal Labour Office said on Thursday the average number of jobless was 4.06m, 220,000 higher than in 2001 and marking the highest annual increase for five years. The annual unemployment rate in 2001 was 9.8 per cent.The broad difference between Germany's east and west persisted last year with unemployment more than twice as high in the former communist east. Baden-Württemberg in Germany's south boasted the lowest unemployment rate at 5.4 per cent while Saxony-Anhalt in the east topped the list with 19.6 per cent. The Labour Office said the increase meant it would need an extra E2bn from the federal government to pay the higher number of people receiving unemployment benefit. Rainer Schmidt, labour market expert at a prominent Kiel-based economic think-tank, said: "We cannot see light at the end of the tunnel yet." He expects another rise in unemployment in January to an unadjusted "minimum of 4.5m people, probably slightly more," depending on the weather.
Source: Financial Times
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"There are serious indications that 2003 will be yet another difficult year for the retail trade," Henning Kreke, chief executive, said, declining to give sales targets for the current year. Analysts said the 2.6 per cent drop in German sales in 2002 betrayed a passable performance at Douglas-branded perfume and cosmetics shops but a sharp fall in sales at its Christ jewellery stores.German retailers have been plagued by Europe's lowest margins for decades. But consumption saw its sharpest drop since the war in 2002 as consumers have grown concerned about unemployment, the country's faltering economy, a perceived rise in inflation, and talks of tax increases.In this context, analysts have praised Metro's expansion of its wholesale Metro and Makro stores beyond Germany over the past few years and the repositioning of its high-end Saturn electronics store as a quasi-discounter through its popular "thrift is cool" campaign launched late last year.
Source: Financial Times
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