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Exports, spending pull euro zone out of recession

Brussels, September 4, 2013

A bounce in exports and spending pulled the euro zone out of recession in the second quarter of 2013, data shows, in the first signs of recovery after the bloc's longest slump.

Stronger-than-expected growth from Germany to Portugal helped the bloc's economy expand 0.3 percent in the April-to-June period, the European Union's statistics office Eurostat said on Wednesday in its first breakdown of the data.

Exports to the rest of the world rose sharply in the quarter after six months of falling sales, while government spending made its first positive contribution to the economy since late 2009 when Greece plunged the euro zone into its debt crisis.

"Everything is pointing to a recovery," Dirk Schumacher, an economist with Goldman Sachs, said, adding he sees 0.1 percent growth in the third quarter. "We do have some divergence between countries, but the upswing is helping everyone to benefit."

Firms in the euro zone - almost a fifth of the world's economy - had their best month in over two years in August as orders rose for the first time since mid-2011, a separate survey showed.

A string of reports in recent days point to renewed growth for the 17 countries sharing the euro, appearing to weaken the case for another interest rate cut by the European Central Bank when it meets on Thursday.

A Reuters survey of 60 economists forecasts the bank will keep rates on hold at 0.5 percent and stay put until at least 2015, while euro zone inflation remains subdued.

Behind Germany's strong growth of 0.7 percent in the second quarter, Eurostat's breakdown highlighted the softening of the austerity policies that many economists blame for worsening the euro zone's 1-1/2 year-long recession. That was accompanied by the first quarterly rise in household spending since late 2011.

Portugal's economy grew 1.1 percent, while Spain's contraction was just 0.1 percent, offering hope that southern Europe will be able to end a social crisis highlighted by popular unrest and record youth joblessness.

The euro zone's fragility was evident in the muted shopping of Europeans during July, when retail trade volumes increased just 0.1 percent, Eurostat said in a separate release.

That was not enough to recoup June's 0.7 percent fall and was below economists' expectations of a 0.4 percent increase.

The euro zone's economy is set to shrink 0.4 percent this year, the European Commission says, and the return to growth in 2014 is likely to be less than in Britain and the United States.

EU policymakers say it is premature to say the euro zone's crisis is over and call on governments to press on with the painful reforms that can return business dynamism to the bloc, beyond the expected improvement in the third quarter.

"We do not interpret a second consecutive solid gain as the start of a strong upturn," Christoph Weil, an economist at Commerzbank, said in a report. "The imbalances in the periphery have yet to be fully corrected and several core countries are increasingly facing problems." – Reuters




Tags: Exports | Spending | Recession | Euro zone |

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