German Unemployment Rises a Third Month as Growth Slows
Comment of the Day

October 30 2013

Commentary by David Fuller

German Unemployment Rises a Third Month as Growth Slows

Here is the opening for Bloomberg's report
German unemployment rose for a third month in October, adding to signs of a slowdown in Europe's largest economy.

The number of people out of work climbed a seasonally-adjusted 2,000 to 2.97 million, after gaining by a revised 24,000 in September, the Nuremberg-based Federal Labor Agency said today. Economists predicted no change, according to the median of 36 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.9 percent.

The German economy, which helped to pull the 17-nation euro area out of recession in three months through June, probably expanded at a slower pace in the third quarter, the Bundesbank said on Oct. 21. Sentiment among companies on the economic outlook dipped for the first time in six months in October amid uncertainty over the pace of the recovery in the currency bloc,Germany's biggest trading partner.

"Survey indicators are weakening a bit and the big concern that we have is that even German companies are not investing that much," said Anatoli Annenkov, senior economist at Societe Generale SA in London. "If we have continued growth in the third and fourth quarter, we can start to look forward to continued improvement in the labor market."

David Fuller's view Germany remains a power house within Europe but it faces four headwinds: 1) A feeble European recovery; 2) A global economy which is far from robust; 3) Uncompetitive energy prices due to windmill folly, nuclear closures despite Germany's enviable safety record; 4) A ban on fracking. For the record, most other EU countries share these problems.

Fortunately for investors, Germany's many world-class companies are doing considerably better (weekly & daily), although they are currently overextended in the short-term and due for mean reversion towards the MA. The medium to longer-term bullish factors in ascending order are: good management, technological innovation and a powerful monetary tailwind from the ECB.

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