German unemployment dips to 18-year low-UPDATE 2

Trade the News

Friday October 29, 2010 05:31:10 PM GMT

* Unadjusted jobless falls below key 3 million mark

* Supports improved consumer outlook

* Adjusted jobless rate steady at 7.5 percent

* Figure misses forecast, but trend still positive-economist

(Adds economist quote, details)

By Joerg Voelkerling

NUREMBERG, Germany, Oct 28 (Reuters) - German unemployment fell to an 18-year low in October, data showed, breaching a key threshold and offering fresh evidence of a sustained recovery by Europe's top economy increasingly fuelled by domestic demand.

The number of unemployed fell, in unadjusted terms, to 2.945 million, the Labour Office said on Thursday, confirming a headline figure announced a day earlier. [ID:nLDE69Q1VE]

The reading was the first below the politically sensitive 3 million mark since November 2008, and the lowest since October 1992.

"The fact that the German government claimed the news already yesterday, prior to the official release, illustrates not only the economic but also the political importance," said Carsten Brzeski from ING Financial Markets.

"The drop ...below the psychological 3 million threshold should support consumer confidence and stimulate consumption."

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Graphic on German unemployment:

http://r.reuters.com/cyt62q

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On an adjusted basis, the jobless rate held steady at 7.5 percent, just below a forecast of 7.4 percent, but economists still saw the data as a sign that persistently strong growth was filtering through to the jobs market.

"Although October's decline in unemployment turned out weaker than expected, the underlying trend in the German labour market clearly remains one of rapid improvement on the back of strong economic growth," said Aline Schuiling from ABN Amro.

PICTURE STILL UPBEAT

Recent German data has been upbeat, buttressing hopes the country's stronger-than-expected recovery will hold up despite the uncertain impact of a fragile global outlook on its traditionally dominant export industries. <ECONDE>

A survey by market research group GfK on Tuesday showed consumer morale remains at its highest level since May 2008 going into November on expectations of a continuing recovery, bolstering hopes that improved domestic demand will take up much of the slack if export growth runs out of steam. [ID:nLDE69P0ES]

Economic sentiment in the wider euro zone also remained buoyant this month, improving against market expectations for a flat reading, European Commission data showed on Thursday. [nBRLSLE682]

Among German businesses, sentiment hit its highest level in 3-1/2 years in October and firms' expectations also improved, a survey showed last week, and the corporate outlook remained bright on Thursday.

Deutsche Lufthansa AG <LHAG.DE> said it expected business to remain strong into 2011 after demand for international premium class travel and cargo services improved in the third quarter. [LDE69R07Y]

And truckmaker MAN SE <MANG.DE> raised its full-year targets for orders, revenue and profitability on the back of booming demand in Brazil and a rebound in its core European market. [ID:nLDE69P24J]

(Additional reporting by Annika Breidthardt, Paul Carrel; writing by Brian Rohan; Editing by John Stonestreet)

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