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German Q3 GDP Growth Moderates; France Recovers

Germany France GDP 111315

German economic growth moderated in the third quarter on weak investment and foreign trade, while the French economy gained momentum on the back of domestic demand.

Gross domestic product of the largest euro area economy climbed 0.3 percent from the second quarter, when it grew 0.4 percent, data from Destatis showed Friday. The third quarter growth came in line with expectations.

At the same time, French GDP logged 0.3 percent sequential growth after stagnating in the second quarter, the statistical office INSEE reported. The economy had expanded 0.7 percent in the first quarter.

Year-on-year, the calendar-adjusted German GDP advanced 1.7 percent, slightly faster than the 1.6 percent rise seen in the prior quarter. Nonetheless, it was slightly weaker than the 1.8 percent growth forecast by economists.

On an unadjusted basis, economic growth improved to 1.8 percent from 1.6 percent. More detailed results of GDP will be released on November 24.

Positive contributions to quarterly German growth were made mainly by final consumption expenditure as both household and government spending increased further.

By contrast, gross fixed capital formation decreased slightly. In addition, foreign trade also had a downward effect on growth because the increase in imports was markedly larger than that of exports, Destatis said.

Carsten Brzeski, chief economist at ING-DiBa cautioned that it is a growth mix which puts future growth at risk. As long as domestic investments are not picking up, celebrations of strong German domestic demand should be taken with a pinch of salt.

Elsewhere in France, household and government consumption climbed 0.3 percent and 0.4 percent, respectively. At the same time, investment rose only 0.1 percent.

While exports slid 0.6 percent, imports advanced 1.7 percent. Consequently, foreign trade balance contributed negative 0.7 points to GDP change. Conversely, changes in inventories contributed positive 0.7 points.

The International Monetary Fund in its latest World Economic Outlook released in October, lowered its growth projections for Germany, while it retained the outlook for France. The lender forecast Germany to grow 1.5 percent this year and France to expand 1.2 percent.

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