EUROPEAN PAIR LEAD RECOVERY
FRANCE and Germany made a surprise return to growth in the second quarter of 2009, official data showed yesterday, making them the first of the major economies to exit the worst post-war global recession.
Figures from Eurostat showed that Western Europe’s two largest economies both grew by 0.3 per cent in the three months to June on the previous quarter, while the Eurozone as a whole shrank by 0.1 per cent.
European stock markets closed higher yesterday, cheered by the growth data, although disappointing US figures undermined initial gains.
But politicians remained wary. German economy minister Karl-Theodor zu Guttenberg said: “There are no grounds for euphoria; we’re still a long way from seeing the economy back at the level that it was at last year.”
French and German output was boosted by a bounce in consumer spending – in particular the success of the car scrappage schemes – and a positive net trade contribution.
Whether the data marks a return to growth or a blip remains to be seen. Charles Dumas at Lombard Street Research said: “Given the temporary nature of the cash for clunkers boost, the prospects for consumer spending this autumn and winter are not rosy.”
CMC Markets’ Ashraf Laidi agreed, saying that one-time quarterly rebounds in the aftermath of two to three consecutive quarterly contractions are not unusual.
“Government stimuli, car incentive schemes and inventory restocking remain no substitutes to a secular rebound in consumer power, especially when unemployment rates have yet to stabilise,” he added.
However, the return to growth was welcomed in Britain by business secretary Lord Mandelson, who said that any improvements in France and Germany were “good news” for the UK, which conducts about half its trade in the Eurozone.
Liberal Democrat shadow chancellor, Vince Cable, agreed but said the size of the UK’s banking sector and its housing bubble left it more exposed than either France or Germany.
Economists now see the whole Eurozone expanding in the third quarter. Previously, the UK had been expected to exit recession first, but poor second quarter data scuppered these hopes.