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French and German growth data better than expected

France has been dogged by two previous quarters of negative growth and battling with record high unemployment of nearly 11 per cent

Story highlights

  • Germany's economy grew 0.7 per cent between April and the end of June, seasonally adjusted from the first quarter
  • The growth puts it ahead of other Group of Seven countries that have already announced second-quarter GDP
  • France confirmed it had pulled out of a mild recession after it reported strong second-quarter growth of 0.5 per cent

Germany and France on Wednesday posted stronger-than-expected growth figures, with Germany recording the strongest economic expansion in more than a year and France confirming that it was no longer in recession.

The positive figures, combined with an end in sight for the recessions in Spain and Italy, should help bolster the eurozone gross domestic product figure for the quarter, which will be published at 10am BST.

"These figures tilt the balance of risk for the euro area as a whole a bit further to the upside," Blerina Uruçi, an economist at Barclays, wrote in a report, adding that the currency bloc's second-quarter growth could come in at 0.3 per cent quarter-on-quarter.

Germany's economy grew 0.7 per cent between April and the end of June, seasonally adjusted from the first quarter, outstripping forecasts thanks mainly to the strength of domestic private and public consumption. Construction output also played a role as the quarterly growth benefited from "catch-up effects following the unusually long and cold winter," Germany's Federal Statistical Office said.

The growth puts it ahead of other Group of Seven countries that have already announced second-quarter GDP, with Japan and the UK both growing 0.6 per cent during the period and the US at a 1.7 per cent annualised pace.

Meanwhile, France confirmed it had pulled out of a mild recession after it reported unexpectedly strong growth of 0.5 per cent during the second quarter.

    The preliminary data from the country's Insee statistics agency came in higher than the 0.2 per cent consensus forecasts and will come as a welcome respite for the government of President François Hollande, as it tries to turn Europe's second-largest economy around.

    Dogged by two previous quarters of negative growth and battling with record high unemployment of nearly 11 per cent, the government has in recent weeks sent a message that the country is finally emerging from recession.

    Pierre Moscovici, economy minister, said the latest growth figure "increases the encouraging signs of recovery".

    Spurring France's improved figures, private consumption rose at its briskest pace in more than two years, driven by energy consumption and car sales. Exports also performed well.

    In a research note Diego Iscaro, economist at IHS Global Insight, said: "It has been a while since we had good news coming from the French economy, but the second-quarter figures really surprised on the upside."

    "However, with unemployment standing at a record high, corporate profitability under intense pressure and fiscal policy being tightened further in 2014, we believe that to expect the strong second quarter performance to be repeated over the coming quarters would be very optimistic," Mr Iscaro added.

    Despite the unexpectedly strong growth, equity markets were little changed. The FTSE Eurofirst 300 was trading 0.1 per cent lower at 1,235.40 as of 9am in London, while France's benchmark index, CAC 40, was unchanged, as was the Dax index in Germany.

    The news from the Netherlands, whose government has been a strong backer of austerity, was not as positive, with its second-quarter contracting 0.2 per cent, confirming its fourth straight quarter of negative growth.