Bundesbank sees German unemployment

German unemployment is set to rise in the next three months after a slump in manufacturing and weak exports weighed down Europe’s largest economy, according to the Bundesbank.

Total output probably contracted in the second quarter, the Frankfurt-based institution said in its monthly report. While domestic demand likely continued to support growth, softer momentum is starting to leave its mark on the labour market.

Joblessness surged the most in a decade in May. While two thirds of the jump was due to changes made to how people are counted in official statistics, the economic slowdown was to blame for most of the rest.

Construction declined in the three months through June, the Bundesbank predicts. Car production fell significantly and is expected to remain low, and exports — already faltering — suffered from a drop in business with the UK.

“Even without these damping special effects, the fundamental economic trend remained weak,” the Bundesbank said. “A recovery in exports and industry isn’t yet in sight.”

The Federal Statistics Office will release a first estimate for Germany’s second-quarter performance on August 14.