Germany’s unemployment rate dropped to a record low of 6.5 per cent in December while Italy’s pushed up to a new high of 13.4 per cent, underscoring the vast differences within the struggling euro zone economy.

The German jobless rate fell from 6.6 per cent in November to its lowest since German reunification in 1990. The rate had been forecast to hold steady.

In Italy, on the other hand, the unemployment rate in November hit its highest since the statistics office began reporting the series in 1977, reflecting the impact of the third recession to hit the country since 2008.

The low unemployment rate also makes Germany the envy of Portugal, where the jobless rate climbed to 13.9 per cent in November, and Greece and Spain, where around a quarter of the population are still out of work.

The number of people out of work in Germany fell by 27,000 on a seasonally adjusted basis to 2.841 million. That was a sharper decrease than the consensus forecast in a Reuters poll, which had been for a drop of 6,000, and was steeper than even the biggest estimate, for a decrease of 15,000.

Chancellor Angela Merkel’s government introduced Germany’s first country-wide wage floor of €8.50 an hour this month. Economists are divided about whether it will cost jobs or boost consumption.

Employment is at a record high in Germany and wages are rising while inflation is at a five-year low. All that is helping to boost domestic demand at a time when investment is weak and exports are sluggish.

Private consumption drove growth in the third quarter, when the German economy narrowly avoided a recession after contracting in the April-June period.

Earlier on Wednesday, data showed retail sales rose by 1 per cent on the month in November and the Federal Statistics Office said they had probably grown 1.1 to 1.3 per cent last year in real terms.

Reuters