Euro Zone Officially Out of Recession

Euro Zone Officially Out of Recession
By MATTHEW SALTMARSH
Copyright by The New York Times
Published: November 13, 2009
http://www.nytimes.com/2009/11/14/business/global/14euro.html?ref=global-home


PARIS — The euro area officially emerged from recession during the third quarter, according to data released Friday, helped in large part by improved export growth and industrial production in the most important economy of the region, Germany.

The E.U.’s statistics agency, Eurostat, reported that G.D.P. growth in the 16-member euro zone improved by 0.4 percent from the second quarter, following five consecutive quarters of contraction. Growth was still 4.1 percent lower than a year earlier.

The rebound appeared to be powered by Germany. There, G.D.P. growth rose by 0.7 percent from the second quarter, when it was up by 0.4 percent. Compared to a year earlier, German G.D.P. was down 4.7 percent.

France recorded a more muted rebound during the same period. French G.D.P. increased by 0.3 percent during the third quarter — the same increase as was reported during the second quarter — against analysts’ expectations of 0.6 percent.

In Italy, growth improved by 0.6 percent from the second quarter.

Analysts said the outlook for the major economies of the region remained patchy going into 2010, particularly because unemployment is still climbing and wages are stagnant.

Of the two main motors of the euro area, the recovery in Germany now appears to be on sounder footing than that of France.

The German numbers were bolstered by an acceleration in industrial production, which was up 3.5 percent in the third quarter from the previous period, and exports, which rose 5.4 percent during the third quarter.

The French recovery was helped by higher exports, while household consumption leveled out.

Still, analysts cautioned that consumption and production in both France and Germany were being temporarily helped by successful “cash for clunkers” automobile incentive programs.

“Growth will probably slow down to more moderate rates after the exceptionally strong third quarter,” said Aline Schuiling, an economist at Fortis Bank in the Netherlands, referring to Germany. “Fixed investment growth is expected to fall back, while consumption continues to be depressed by a rise in unemployment and falling wage growth.”

Oscar Bernal, an analyst at ING, said the French recovery “is still rather weak and reliant upon the stimulus package put in place by the authorities.”

He noted that the growth in consumer spending moderated during the third quarter and said “the trend is not likely to improve.”

France, which tends to produce lower value-added goods than Germany, appears less well positioned to benefit from the stronger growth in emerging countries, Mr. Bernal said.

“Only public spending is likely to keep sustaining growth in the next quarters,” he said.

At the same time, there is a danger that the European authorities will soon pressure France to limit spending to curb its rising public deficit and debt ratios, analysts say.

For the 27 members of the European Union, growth in the third quarter was up by a more modest 0.2 percent, Eurostat said.

In particular, the British economy appeared to be lagging its neighbors. Growth in Britain contracted by 0.4 percent in July to September from the previous three months, and it shrank by 5.2 percent compared with a year earlier, according to a recent report by the Office of National Statistics in London.

A significant reason for the divergent performance between the economies appears to be the larger debt burden of British consumers.

All the data are preliminary, and further details will be published later in the month.