‘No longer rosy’ German economy rocked – auto industry deteriorates for 5th month in a row

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The Ifo indicator for the German auto sector fell to minus 1 point in December, after plus 7.9 in November. Oliver Falck, the head of the Ifo Center for Industrial Organisation and New Technologies said: “This renewed deterioration is driven by the manufacturers, not the suppliers.”

The situation indicator for manufacturers fell significantly to 15.6 points, after 36.5 in November.

All manufacturers continue to be affected by supply bottlenecks for preliminary products.

Business abroad seems to be stalling.

The index for export expectations fell to 28.1 points from 51.1 in November.

Mr Falck added: “The expectations of the manufacturers are also no longer so rosy.”

The manufacturers’ business expectations fell from 42.7 points to 18.2 in December.

The situation with the manufacturers transfers directly to that of suppliers, which remains pretty bad.

The indicator rose to minus 13.6 points, after minus 21.7 points in November, but remained clearly in negative territory.

Suppliers’ business expectations are more pessimistic than they have been in almost two years.

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The index fell from minus 24.8 points to minus 28.6 points in December.

Mr Falck said: “The latest announcements by car manufacturers that they are expanding their activities in China are certainly having a negative impact on the mood of medium-sized suppliers in particular, who are heavily dependent on automobile production in Germany.”

Despite the bad news in the auto sector, German unemployment fell more than expected in December, data showed on Tuesday, in a further sign that the labour market in Europe’s largest economy remains resilient despite rising COVID-19 infections.

The Labour Office said the number of people out of work fell by 23,000 in seasonally adjusted terms to 2.405 million. A Reuters poll had forecast a fall of 15,000.

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Labour Office head Detlef Scheele said: “The labour market developed well at the end of the year. The recovery of the previous months continued.”

The seasonally-adjusted jobless rate fell to 5.2 percent, the lowest since March 2020, when Germany entered its first coronavirus lockdown.

Scheele cautioned that a jump in COVID-19 cases and renewed restrictions to contain the spread of the disease increased uncertainties.

This was mirrored in the fact that more companies signalled in December they could soon put more workers on furlough again.

In October, the latest month for which reliable data was available, the number of employees put on reduced working hours in job protection schemes, also known as Kurzarbeit, fell to some 710,000.

That was sharply down from its peak of around six million reached in April 2020.

Additional reporting by Monika Pallenberg

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