Eurozone to exit recession as Germany, France rebound

AFP , Wednesday 14 Aug 2013

The Eurozone's financial crisis approaches its end as Germany and France achieve considerable growth rates

The troubled eurozone looks poised to exit its long recession with new data on Wednesday showing that the region's two heavyweights, Germany and France, are bouncing back to growth.

The German economy, Europe's biggest, expanded by 0.7 percent in the second quarter of 2013, the federal statistics office Destatis calculated.

Analysts had been pencilling in growth of around 0.5 percent for the period from April to June after gross domestic product (GDP) stagnated in the first quarter.

Growth was driven mainly by domestic demand, with consumer spending and public expenditure both on the rise.

Investment was also up on the previous quarter, Destatis said in a statement.

Another contributing factor was the catch-up effect following the unusually long and harsh winter, the statisticians explained.

Foreign trade similarly gave the data a boost with exports rising faster than imports.

Compared with the year-earlier period, GDP grew by 0.5 percent in price, seasonally and calendar adjusted terms in the second quarter, Destatis said.

At the same time, France's economy has jumped out of recession, posting stronger-than-expected 0.5 percent quarter-on-quarter growth in April through June, its best result in two years.

France's return to growth in the second quarter followed 0.2 percent contractions in both the final quarter of last year and the first quarter of this year.

The expansion, which beat analyst forecasts, was largely thanks to improved domestic consumption, the national statistics agency INSEE said in a statement.

"This is the largest increase since the first quarter of 2011," it added.

French Finance Minister Pierre Moscovici welcomed the rebound in GDP, which he said "confirms the end of the recession in the French economy".

"It amplifies the encouraging signs of recovery," he said in a statement.

The main European stock markets firmed slightly on the news.

While various data has indicated that French economy is perking up, analysts had expected that the recovery would be more tepid.

After earlier predicting that the economy would contract by 0.1 percent overall this year, INSEE said it now expects growth of 0.1 percent for 2013, in line with government forecasts.

"The eurozone's two heavy-weights bounced back with substantial growth in the second quarter," said Berenberg Bank economist Christian Schulz.

"Their growth, in combination with the much milder recession in the crisis countries, has dragged the eurozone out of recession since Easter."

In both Germany and France, growth was driven by domestic demand, while trade was buoyant but probably broadly neutral for overall growth, the expert said.

But he noted that while investment made a return in Germany, "it remained elusive in France, suggesting that France's bounce-back does not signal a return to persistent strong growth yet."

Data to be released later on Wednesday is expected to show that the 17-country eurozone has edged out of its 18-month recession, with many analysts pencilling in 0.2 percent growth.

However, the Italian economy, the third-biggest in the eurozone after the German and French economies, is still struggling.

Data released late on Tuesday showed that the economy shrank by less than feared in the second quarter of 2013, boosting hopes that the end of recession is in sight, but marked the eighth quarterly contraction in a row.

The official Istat data agency said that the economy shrank by 0.2 percent in the quarter, amid recent indicators that the recession is easing.

Economists polled by Dow Jones Newswires had forecast a 0.4 percent quarterly drop.

The latest shrinkage follows a 0.6 percent contraction in the first three months.

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