Two of Europe's biggest economies, Germany and France, emerged from recession today as both recorded unexpected growth in a further sign that a recovery is beginning to take shape.
A day after the Federal Reserve said the recession-hit US economy was stabilising, official statistics showed that Germany and France both achieved positive growth of 0.3% in the second quarter of the year.
Germany, Europe's biggest economy had not seen positive growth since the first quarter of 2008. Analysts had forecast a 0.2% drop.
The figures from France were equally unexpected as the national statistics office INSEE had forecast a 0.6% drop and the Bank of France a 0.4% contraction for the quarter.
'After four quarters of negative growth, France is finally coming out of the red,' French Finance Minister Christine Lagarde said on RTL radio.
France had also been in recession for a last 18 months and its economy contracted by 1.2% in the first quarter. Recession is widely understood to be a run of two quarters or more of contracting output in a row.
Figures from other parts of Europe showed however that many countries are still firmly in the grip of recession. For example, Austria's economy slowed further in the second quarter of the year while Slovakia's economy contracted by 5.3% on a 12-month comparison in the second quarter and the Hungarian economy shrank 2.1%.
Germany's Federal Statistics Office said today that the preliminary quarter-on-quarter rise was led by increases in private and public consumption, construction and net trade, as a slump in imports outpaced a decline in exports.
Europe's largest economy had been in its sharpest recession since the war, with GDP declining for four consecutive quarters. A record GDP contraction in the first quarter was revised up to a fall of 3.5% from 3.8% previously.
Year-on-year, the economy shrank by 7.1% in the second quarter, the data showed, following a 6.4% drop in the January-March period. Economists had expected GDP to contract by 0.3% on the quarter and post a 7.3% drop year-on-year.
The government expects the economy to contract by some 6% this year.
However, the Economy Ministry had said before the publication of the GDP figures that the economy probably stabilised in the second quarter. Adjusted for working days, German GDP contracted by 5.9% on the year in the second quarter. In the first quarter, it shrank by 6.7%.
The French Finance Minister Christine Lagarde said that consumption rose 0.3% after rising 0.2% in the previous three months.
She said that government trade-in schemes for old cars and falling prices, particularly among big retailers, were helping consumers although she said there was no danger of deflation setting in.
She also said that solid exports were helping growth and had contributed 0.9% to the figure. She noted that French car exporters had been helped by Germany's car trade-in incentives.
Lagarde said strong public sector investment, fuelled by government stimulus measures to counter the global economic crisis, was bolstering growth. But she noted that investment by private companies was still weak.
