German Job Losses at Post-1990 High

Germany shed more jobs in the second quarter of the year than at any time since unification as the economy slipped into recession, according to official figures yesterday.

In the three months to the end of June employment fell 646,000 to just over 38 million, the biggest decline since 1990, according to the federal statistics office.

The bulk of the job losses were in manufacturing and construction but employment levels in the services sector were also down.

However, optimism that a recovery is on the way is growing, according to one of the country's leading economic thinktanks. The ZEW said its sentiment indicator, which canvasses opinions from 300 institutional investors and analysts, showed a sharp rise in July - the eighth monthly improvement in a row and well ahead of expectations.

"The indicator further builds on its rise above its long term average ... strengthening expectations of an economic recovery at the beginning of next year," ZEW said. It said higher than expected manufacturing data, prospects for the US economy and rising profit levels at a number of leading German firms may have helped boost confidence.

On Monday the Bundesbank, Germany's central bank, said in its latest monthly report that while "surveys point to a brightening sentiment in Germany and financial markets have become more confident ... these hopes have not so far manifested themselves in hard data."

The Bundesbank is not alone in its warnings that expectations have yet to translate into reality. "In the third quarter industry orders and industry production need to rise, then we can say the turnaround is here and things can really start to improve," said Ulrike Kasten at Sal Oppenheim."

Industrial output in the eurozone fell 0.1% last month compared to June and was 1.6% down on a year earlier, EU statisticians said yesterday.