German inflation accelerated more than expected in November, reaching the highest level since February, while the number of people out of work rose and retail sales fell.
The mixed signals come as Germany experiences a sluggish recovery after two years of contraction. The economy is expected to grow by only 0.2% in 2025 as Chancellor Friedrich Merz's spending measures need time to translate into better conditions.
Inflation in the euro zone's largest economy rose to 2.6% year-on-year in November, preliminary data from the federal statistics office showed today. Analysts polled by Reuters had forecast EU-harmonised inflation nudging up to 2.4% from last month's 2.3%.
Germany's core inflation rate, which excludes volatile food and energy prices, fell to 2.7% from 2.8% in the previous month. The German data comes ahead of the euro zone inflation release on Tuesday.
Inflation in the bloc is expected at 2.1% in November, unchanged from the previous month, according to economists polled by Reuters.
The European Central Bank left interest rates unchanged at 2% in October and repeated that policy was in a "good place" as economic risks recede.
Meanwhile, the number of people out of work in Germany rose by fewer than expected in November, but labour demand continued to slow, underscoring a persistent lack of momentum in the job market.
In seasonally adjusted terms, the jobless figure rose by 1,000 to 2.973 million, labour office figures showed today, while analysts and economists had predicted an increase by 5,000 in a Reuters poll.
"The feared worsening of the labour market that emerged after the number of unemployed reached the symbolic 3-million mark in August has so far been avoided," said Carsten Brzeski, global head of macro at ING.
The seasonally adjusted jobless rate was unchanged from 6.3% a month earlier.
Labour office head Andrea Nahles said the number of people in employment was stagnating and demand for labour remained subdued.
There were 624,000 job openings in November, 44,000 fewer than a year ago.
"Companies are still facing major economic challenges and this continues to be reflected in the labour market," German Labour Minister Baerbel Bas said.
Companies in Germany have grown more restrictive in their personnel planning, a survey by the Ifo institute showed on Wednesday, with the employment barometer falling to its lowest level in more than five years.
The German Labour Office expects unemployment to rise to more than 3 million at the beginning of next year.
New figures today also showed that retail sales fell by 0.3% on the month, data from the statistics office showed, compared to a 0.2% increase forecast in a Reuters poll.
The data remain consistent with a sharp slowdown in retail sales growth through 2025, following strong gains at the end of 2024 and into this year, said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.
A survey by the Ifo institute showed that around one-in-four companies in the retail sector anticipated business would be poor this Christmas season.
