UPDATE 3-German jobless numbers hit 12-year high, economy posts steady growth

The number of unemployed people in Germany hit a 12-year high, surpassing the ‌3 million mark this month, even after Europe's biggest economy brushed off trade turmoil and outperformed economists' growth expectations last quarter.

The number of unemployed people in Germany hit a 12-year high, surpassing the ‌3 million mark this month, even after Europe's biggest economy brushed off trade turmoil and outperformed economists' growth expectations last quarter. Chancellor Friedrich Merz has promised to revive the economy after two years of mild contraction, pledging a sharp increase in infrastructure and defence spending. While the economy ⁠as a whole is displaying greater resilience, Merz's measures are taking longer than expected to translate into better conditions on the ground.

Labour office figures on Friday highlighted the lag in the jobs market from the economic stagnation of the last few years, with 177,000 more people out of work than in December, bringing the total to 3.08 million. The unemployment rate jumped by 0.4 percentage points to 6.6% ​in seasonally unadjusted terms. "There is currently little momentum in the labour market," said labour office director Andrea Nahles. "At the start of the year, unemployment rose markedly for seasonal reasons."

The ‍picture improved slightly when accounting for seasonal trends. The labour office said that on that basis the number of people out of work was unchanged from December at 2.976 million and that the seasonally adjusted jobless rate was steady at 6.3%. Analysts and economists in a Reuters poll had predicted a seasonally adjusted rise of 4,000 in the jobless number. ECONOMY RESILIENT IN FACE OF TRADE TURMOIL On a positive note, German gross domestic product grew by 0.3% in ⁠the fourth quarter ‌compared with the previous three months, beating the ⁠consensus forecast of 0.2%. On an annual basis, the statistics office confirmed its first estimate of 0.2% growth.

"This chimes with some other signs that the economy is turning the corner, including a pick-up in activity surveys and industrial ‍orders," said Franziska Palmas, senior Europe economist at Capital Economics. She nevertheless noted that GDP was still only 0.5% higher than levels seen just before the pandemic. Economy Minister Katherina Reiche said the country must pivot toward new "growth ​engines", arguing that traditional export strengths "no longer carry our growth". "The biggest domestic risk remains any sudden shift from national depression to national complacency," said Carsten Brzeski, global head of ⁠macro at ING, calling for structural reforms. Europe's biggest economy lowered its growth forecasts for this and next year on Wednesday, as fiscal-policy measures have not taken effect as quickly as previously assumed. "The German government's large fiscal package is unlikely to fall ⁠on fertile ground, as the vast majority of companies do not believe in the long-awaited restart in economic policy," said Joerg Kraemer, chief economist at Commerzbank.

INFLATION UP IN FIVE STATES Annual inflation rose in January in five German states, preliminary data showed on Friday, suggesting the nationwide rate - due out later in the day - has also risen this month.

Price growth of 2.0% ⁠to 2.3% was recorded in North Rhine-Westphalia, Baden-Wuerttemberg, Bavaria, Saxony and Lower Saxony, and economists polled by Reuters forecast a harmonised national rate of 2.0% for January, unchanged from last month's rate. "German GDP ⁠growth came in slightly stronger than implied ‌by the full-year 2025 estimate and combined with the absence of any downside in this morning's state CPIs, these data tilt hawkish for the European Central Bank next week," said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.

Euro zone annual inflation, due out next Wednesday, is expected ⁠at 1.7% for January, down from 1.9% in December, according to economists polled by Reuters. (Additional reporting by Friederike Heine and Miranda ‍Murray; editing by Mark Heinrich and Hugh Lawson)

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