German Unemployment Rises as Economy Ends 2019 With a Whimper

(Bloomberg) -- German unemployment rose at the end of 2019, signaling that Europe’s biggest economy remains mired in uncertainty as manufacturing contracts and the government resists calls for fiscal stimulus.

The number of people out of work climbed by 8,000 in December, twice as much as forecast by economists. Even so, the jobless rate held at 5%, near a record low.

German factories suffered their worst downturn in a decade last year as the U.S.-China trade war and Brexit heightened exporters’ concerns, and automakers struggled with the transition to electric vehicles. That weighed on euro-area momentum, prompting the European Central Bank to step up monetary stimulus and call for governments with fiscal space -- such as Germany -- to spend more.

Recent economic data in the country has been mixed. A survey of business confidence in December improved for a third month, yet a purchasing managers index this week pointed to the manufacturing slump worsening.

The Bundesbank’s most-recent projections show that domestic demand will increasingly be hurt by a weakening labor market. The central bank cut its 2020 GDP forecast in half and now foresees an expansion of just 0.6%.

Bundesbank President Jens Weidmann has said rising government spending will support the economy but he sees no need for a significant fiscal stimulus package. That echoes the view of the government, which argues that the economy is not in a crisis.

To contact the reporter on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Catherine Bosley

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