Bloomberg News - German Unemployment Falls a Fifth Month as Economy Grows

German unemployment fell more than twice as much as forecast in April in a sign that Europe’s largest economy will continue to lead the recovery in the euro area.

The number of people out of work decreased for a fifth month, dropping a seasonally-adjusted 25,000 to 2.872 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, according to the median of 25 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent, the lowest level in two decades.

Germany has benefited from ultra-low interest rates in the euro area and the emergence last year of the 18-nation currency bloc from its longest-ever recession. The Bundesbank said this week that consumer sentiment and demand for housing construction in the country remain “exceptionally favorable.”

“Germany is well known for its exports but we also see a very positive trend for domestic demand,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. “That’s good news for the country’s labor market and, of course, for the economy in the entire euro area.”

The number of unemployed shrank by 14,000 in western Germany and 11,000 in the eastern part of the nation, today’s report showed.

Euro-Area Unemployment

The German economy grew 0.4 percent in the final three months of 2013, twice as fast as the euro area. Gross domestic product figures for the first quarter are due to be published on May 15.

Volkswagen AG, Europe’s largest automaker, reported a 22 percent gain in first-quarter operating profit yesterday, helped by record sales at its luxury Porsche and Audi brands.

Germany’s jobless rate contrasts with the rest of the currency bloc. Unemployment in the region probably held at 11.9 percent in March, according to a separate Bloomberg survey before data due on May 2.

The state of the euro-area economy is “is pretty severe,” European Central Bank President Mario Draghi said this month. His “biggest fear” is a protracted stagnation that leads to high unemployment rates becoming structural, he said on April 3 after officials kept the benchmark interest rate unchanged at a record-low 0.25 percent.

The central bank’s 24-member Governing Council will gather in Brussels next week and announce its interest-rate decision on May 8. Draghi has said the ECB stands ready to deploy unconventional measures such as a negative deposit rate or quantitative easing if needed to fight the threat of deflation.

Euro-area inflation data for April will be published at 11 a.m. in Luxembourg today. Prices probably rose 0.8 percent from a year ago, compared with 0.5 percent in March, according to the median estimate in a Bloomberg survey. German inflation accelerated less than economists forecast this month, data from the Federal Statistics Office in Wiesbaden showed yesterday.

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net