ECONOMICS - THE WEEK IN VIEW

German unemployment figures this week are expected to show the first drop in the jobless figures for a year but the reduction will probably be so small that it is likely to confirm pessimism about how fragile the recovery is in Europe's leading economy.

The number of jobless is expected to have fallen by 20,000 in March putting the total unemployed at 4.296 million. Warmer weather has brought the construction industry back to life and prompted companies to rehire staff they shed over January and February.

"The fall is a statistical effect after unemployment surged at the start of the year," said Klaus Schruefer, an economist at BfG Bank. "It's not a signal things will get better."

Last week, though, showed some signs of spring. Germany's industrial production rose a greater-than-expected 1.9 per cent in February and factory orders rose for the second month, the Economics Ministry said. This should keeps growth on target to meet the government's forecast of 2.5 per cent this year.

A recovery in the construction industry propelled the rise. Construction output bounced back to increase 16.6 per cent, following a 24 per cent slump the previous month as freezing temperatures brought building to a standstill.

German industry has profited from seven months of historically low interest rates and a 10 per cent decline in the mark against the US dollar in the first two months of the year, helping exporters.

"The impact of months of currency weakness will continue to filter through to exports," said Sonja Gibbs, an economist at Nomura International.

Indications that the export-led rebound is finally encouraging domestic firms to expand investment is mounting as several of Germany's biggest companies have been reporting improved prospects for sales and profits this year.

Volkswagen AG, Europe's largest car maker, said it has introduced additional Saturday shifts to keep up with strong demand. Sales at VW rose 13 per cent in the first two months to 660,000 units. BMW, the luxury car maker, said group sales rose 22 per cent in the first quarter. Copyright: IOS & Bloomberg