Berlin – Despite the deepening sense of gloom engulfing the world economy, German unemployment fell more than expected in November, the nation’s Labour Office said Thursday,

Seasonally adjusted unemployment in Europe’s biggest economy dropped by 10,000 to 3.15 million in November, which was double the 5,000 fall forecast by economists.

Based on the politically important unadjusted terms, German unemployment fell by 8,000 to 2.9 million. This was 390,000 less than in the same month last year. The unadjusted jobless rate edged down from 7.2 per cent in October to 7.1 per cent this month.

Unemployment is, however, a lagging economic indicator with Labour Office chief Frank-Juergen Weise warning that the economic downturn was likely to soon catch up with the German labour market.

Despite the November fall in unemployment, economists believe that the number of people out of work in Germany is set to rise in the coming months with companies having already announced layoffs and production cuts.

In particular, this includes Germany’s key export sectors, such as chemicals and cars, which have been badly hit by the world economic downturn triggered by the financial crisis.

Germany’s car industry could be poised to axe up to 60,000 jobs in the coming months, the German Automobile Economy Institute warned last week.

The country’s auto industry association (VDA) estimates that about one in eight jobs in Germany is linked to the automobile industry.

The prospects of growing job losses in Germany and its partners in the 15-member eurozone is likely to add to the pressure on the European Central Bank to deliver another hefty cut in interest rates when it meets next week.

The Paris-based Organization for Economic Cooperation and Development (OECD) warned this week that 700,000 jobs might be axed in Germany by the end of 2010 as the nation faces up to what could be its biggest economic slump since 1949.

German Finance Minister Peer Steinbrueck said this week that the nation’s economy could contract in 2009 by up to 1 per cent before the massive stimulus plans unveiled in recent weeks by governments around the world help to fire growth during the second half of the year.

Business confidence in Germany dropped to its lowest in nearly 16 years in November, a key survey released by the Munich-based Ifo economic institute said this week.

However, a separate index also released this week showed German consumer confidence staging a surprise increase on the back of a fall in oil prices and consequently lower inflation.

But the report, drawn up by the Nuremberg-based GfK market research institute, said the index’s component measuring consumers’ economic expectations dropped to its lowest reading in about 17 years.

Moreover, the GfK said the prospects for consumer confidence would now “very much depend on how deep the recession is and how the labour market will be affected.”

Germany tipped into recession during the third quarter as exports sunk and companies slashed back on investment.

“On the whole the economic downturn has worsened and will now have an impact on the labour market,” said Hans-Werner Sinn, the president of the Ifo economic institute releasing the think tank’s latest business confidence survey.

“The export business is expected to weaken at an accelerated pace and plans call for reductions in staff,” he said. (dpa)