Looks like good economic news for Europe
France and Germany return to growth
By Gerrit Wiesmann in Frankfurt
Published: August 13 2009 09:07 | Last updated: August 13 2009 11:27
An unexpected rebound in French and German growth helped push the eurozone to the brink of economic recovery in the second quarter, delivering a further signal that the worst of the global crisis may be coming to an end in Europe.
Gross domestic product in the 16-nation currency bloc fell 0.1 per cent in April, May and June, the European statistics office said on Thursday, cheering economists who had expected a decline of 0.5 per cent after a drop of 2.5 per cent in the first quarter of the year.
“The overall story is that the eurozone economy has been pulled out of recession by a combination of the revival in the global economy and government fiscal stimulus,” said Nick Kounis, an economist at Fortis Bank in Amsterdam.
Many economists said they expected the eurozone to swing back to growth in the second half of the year, although they also warned that unemployment, fragile bank lending and an end to stimulus spending still may challenge European economies.
“Several headwinds are still present in the economy,” said Clemente de Lucia at BNP Paribas in Paris, warning that joblessness could hit consumer spending, and bank write-downs may rein in lending to industry in the coming months.
Component figures released by national statistical offices over the past days showed that most economies shrank at a slower rate in the second quarter than earlier in the year, with Germany and France reporting a surprise return to growth.
Robust consumer and public spending - buoyed by large government stimulus programmes - helped both economies grow 0.3 per cent in April, May and June, according to data released by both countries’ statistical offices today.
The trends surprised economists.
They had been expecting both economies to contract again – by 0.3 per cent - after German GDP plummeted 3.5 per cent and French GDP shrank by 1.3 per cent in the first quarter.
“This is the pleasant surprise of the summer for both France and Germany,” said Marc Touati at Global Equities in Paris, although he warned risks to growth remained as stimulus spending ended and the euro remained strong.
The export-led Germany economy suffered a precipitous fall after financial crisis triggered global recession last year. But signs have mounted recently that a resurgence of foreign demand could quickly stabilise the economy again.
Christian Dreger at the DIW Economic Research Institute in Berlin said German industry appeared to have come through the worst of the crisis as the global economy recovered. “It looks like the recession’s over,” he said.
While Greece and Portugal grew 0.3 per cent in the second quarter, the Austrian and Belgian economies shrank 0.4 per cent, Italy’s 0.5 per cent, and the Dutch economy by 0.9 percent. Although the economies shrank, the rates were slower than in the first quarter.