RTTN:Eurozone Exits Longest Recession As Germany, France Recover
Eurozone economy shrugged off its longest recession on record in the second quarter of 2013, helped by strong recovery in Germany and France, the latest figures from Eurostat revealed Wednesday.
Gross domestic product expanded 0.3 percent quarter-on-quarter in the second quarter, reversing a 0.3 percent contraction in the first quarter. Economists had forecast a GDP growth of 0.2 percent.
This was the strongest growth rate since the first quarter of 2011, when GDP grew 0.7 percent. The 17-nation economy entered the recession in the first quarter of 2012 and has contracted for six consecutive quarters.
While there was clear underlying improvement in the Eurozone's economic performance in the second quarter, it is likely that the latest growth overstates the region's economic health, IHS Global Insight's Chief European and UK Economist Howard Archer said.
"It does appear that some of the improvement in the second quarter was due to a rebound in construction activity after it had been held back in some countries, notably Germany, by very bad weather in the first quarter," Archer said.
Compared with the same quarter of 2012, seasonally adjusted GDP fell 0.7 percent in the euro area. This was slightly weaker than the expected 0.8 percent fall.
Data released earlier today showed that Germany and France recorded stronger-than-expected growth rates in the second quarter.
While the German economy gathered steam with a solid 0.7 percent growth after stagnating in the first quarter, France moved out of a shallow recession with 0.5 percent expansion, the fastest pace in more than two years.
Elsewhere in the region, official data released today showed that Portugal has exited recession in the second quarter, while the Austrian economy expanded at a faster pace. Recession eased in the Netherlands and Cyprus as also the case with Spain, Italy and Greece. "While the return to economic growth in the euro-zone is a welcome development, it would be wrong to think that it will bring an end to the travails of the highly indebted and uncompetitive countries of the periphery," said Jonathan Loynes, Chief European Economist at Capital Economics.
The European Central Bank forecasts the single-currency bloc to contract 0.6 percent this year, before expanding 1.1 percent next year. The bank expects a gradual recovery to take hold later this year.
The International Monetary Fund also forecasts the region to remain in recession this year with activity contracting by over 0.5 percent. Growth will rise to just under 1 percent in 2014, according to the lender.
