Au revoir recession?

Both the French and German economies grew by 0.3% between April and June, finally bringing an end to the year long recession in Europe’s largest economies.

The growth in the economy has been spurred on by stronger exports and consumer spending, as well as government stimulus packages. However, the news came as a surprise to many as only a few analysts were expecting Germany and France to recover so soon.

Economic activity in the Eurozone fell by 0.1%, showing the region as a whole is still in recession. The contraction was a marked improvement on the 2.5% drop recorded in the first three months of the year, and was smaller than economists had predicted.

In France, economy minister Christine Lagarde said: “The data is very surprising. After four negative quarters France is coming out of the red.” Ms Lagarde believes that consumer spending and strong exports have helped to pull France out of recession. “What we see is that consumption is holding up,” she said. Official figures show that household consumption rose by 0.4% in the second quarter of 2009. She said government incentive schemes for trading in old cars, together with falling prices, were helping consumers. Foreign trade contributed 0.9% to France’s GDP – which Ms Lagarde believes to have had a “very strong impact”. “The figures are a positive surprise, as many people were expecting slightly negative numbers,” said Marie Diron at Oxford Economics. But she warned that the growth in both economies was “still very fragile”.