What the analysts are saying about French and German GDP data
Here's what the analysts have to say about strong growth in the French and German economies this morning.
Ishaq Siddiqi, ETX Capital:
Both economies showing a solid upswing, particularly France (given how markets have worried about the government’s slow implementation of budget reforms) bodes well for a robust reading for the euro area as a whole, due at 0900 GMT. The euro zone GDP figure is expected to show the region exiting a recession, posting growth of 0.1% on the quarter but after today’s German and French readings, some in the market are reconsidering their forecasts in the event of a stronger turnout.
Germany’s figure certainly suggests that the worse of the economic turmoil in the country is over and the region’s powerhouse is back on its feet. Music to the ears of Chancellor Angela Merkel who is fighting for her job at next month’s national elections. French President Francois Hollande will also welcome the French GDP figure as this outcome is the strongest quarterly expansion since the start of his Presidential term. With the full euro area reading due in the next few hours, attention shifts to how the periphery has performed during the quarter. Both Spanish and Italian GDP figures for the period are expected to show a contraction between 0.1% to 0.2%, an outcome that investors will still welcome given that economic conditions have deteriorated further.
Joerg Kraemer, Commerzbank:
There are two reasons for this [German growth] – first the catch-up effect in construction, which alone contributed 0.3 percentage points to growth. Secondly we've straightened out the dip in exports. In the winter half of the year exports shrank, which is very unusual for the German economy… As these special effects will wear off, we expect future growth to be more moderate.
Christian Schulz, Berenberg Bank:
The Eurozone’s two heavy-weights bounced back with substantial growth in Q2. 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. But 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.