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Germany Avoids Recession, France Stagnates

Germany Avoids Recession, France Stagnates
5/15/2012 4:09 AM ET

Germany avoided slipping into recession in the first quarter of 2012 backed by exports and domestic consumption, while the French economy recorded zero growth due to falling investment.

Despite the better-than-expected German figures, Eurozone is still expected to return to recession in the first quarter due to weakness elsewhere in the currency bloc.

The Federal Statistical Office said Tuesday that the German gross domestic product grew 0.5 percent in the first three months of 2012 after adjusting for seasonal and calendar variations. The outcome was much stronger than the expected 0.1 percent growth.

The latest expansion followed a 0.2 percent slump in the fourth quarter, the first time the country suffered a decline in economic activity since the 2009 global financial crisis.

"The German economy has escaped the technical recession many other Eurozone countries are currently experiencing with no more than a fright," Carsten Brzeski, senior economist at ING Bank NV said.

"Looking ahead, with the strong fundamentals, the German economy should remain the stronghold of the Eurozone."

Positive contribution came mainly from net trade. Exports, in contrast to imports, rose at the beginning of the year, the statistical office said. Domestic consumption was higher than in the previous quarter, which partly compensated the decrease in investment, the agency added.

Year-on-year, the calendar adjusted GDP rose 1.2 percent in the first quarter, slower than 2 percent growth in the fourth quarter. Economists were looking for a 0.8 percent growth.

On an unadjusted basis, GDP was up 1.7 percent year-on-year compared to the forecast for a 0.9 percent increase.

The French economy, Eurozone's second largest, stagnated in the first quarter amid falling investments and slowing export growth.

The statistical office Insee said Tuesday that the GDP recorded no change during the first three months of the year, in line with economists' expectations.

The fourth quarter growth rate, meanwhile, was revised down to 0.1 percent from the previously estimated 0.2 percent.

Consumer spending grew 0.2 percent quarter-on-quarter during the first quarter, while investment declined 0.8 percent. Overall domestic demand, excluding inventory changes, added just 0.1 percentage point, less than 0.3 percentage point in the fourth quarter.

Imports rebounded with 0.7 percent rise, while export growth slowed to 0.3 percent. Consequently, foreign trade balance contributed negatively to GDP growth in contrast to the 0.7 percentage points added in the previous quarter. Changes in inventories contributed positively to GDP.

The German government has forecast the economy to grow 0.7 percent this year and 1.6 percent in 2013.

The European Commission expects Germany to grow 0.7 percent in 2012 and 1.7 percent next year, while France is forecast to grow 1.3 percent in 2013 after expanding by a modest 0.5 percent in 2012.

The International Monetary Fund sees 0.6 percent expansion in Germany this year and projects 0.5 percent growth for France.

by RTT Staff Writer

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