The German unemployment rate rose in February and analysts expect it to go much higher this year as Europe's biggest economy is slammed by the global economic downturn.
The unemployment rate increased to 8.5% from 8.3% in January, figures released today by the national labour office showed.
The number of unemployed workers reached 3.552 million in February, a one-month gain of 63,000, the office said, adding that part-time contracts had prevented a bigger increase.
A hard winter that has curbed construction activity played a major role in the rise. But a slump in crucial German exports and weaker business investment indicate that unemployment will increase further in the coming months, analysts said.
Three economic surveys point to improving mood
Meanwhile, a survey of consumer confidence released today by the GfK research institute noted an improvement owing to a state car replacement incentive and rock-bottom inflation, but warned that rising unemployment could counter that trend.
A poll of around 2,000 people by the GfK institute showed a rise in consumer confidence to an indexed 2.6 points for March from a revised 2.3 points in February, the group said. Inflation has fallen below 1% in Germany, creating much more fertile ground for consumption.
And a government scheme that gives consumers €2,500 if they turn in an old car to buy a new one that pollutes less has been very well received in a country where cars are major status symbols.
The plan is part of a €50 billion economic stimulus package approved by lawmakers to jumpstart the German economic engine.
Earlier this week, the Ifo economic institute said in its widely watched survey of German business confidence that retailers' outlook for both the present and the next six months had brightened for the same reason.
Construction leaders also hoped to benefit from funds in the package that have been earmarked for infrastructure improvements.
Last week, the ZEW research institute found that German investor confidence had staged another surprising gain as well, so the GfK poll completed a trio of positive German indicators.
But analysts still warn that the export-oriented economy faces serious obstacles before it pulls out of its deepest recession since World War II.
The GfK survey is the main barometer of German consumer confidence, and measures expectations for personal income, for the economy as a whole, and the propensity of consumers to make large purchases.
GfK still expects private consumption to grow by 0.5% in 2009, but it allows for changes to that forecast said all will depend on how the job market develops during the the year. A strong increase in unemployment, which many economists expect to happen, would deal a severe blow to consumer sentiment, GfK warns.
