German Economy Stagnates; France GDP Growth Gains Momentum

The German economy stabilized in the second quarter as private consumption helped to halt the recession, official data showed on Friday. Despite the social unrest, growth in the French economy accelerated on robust exports.

Elsewhere, the Spanish economy continued to register moderate growth in the second quarter with notable improvements in household consumption and investment.

Germany’s gross domestic product remained flat in the second quarter, following a 0.1 percent drop in the first quarter and 0.4 percent decline in the fourth quarter of 2022, Destatis reported. GDP was expected to climb 0.1 percent.

Destatis said household spending stabilized in the second quarter after the weak winter half-year.

On a yearly basis, price-adjusted GDP dropped 0.6 percent in contrast to the 0.1 percent rise a quarter ago. Calendar-adjusted GDP fell 0.2 percent, the same rate of fall as reported in the first quarter.

The German economy seems to be stuck in the twilight zone between stagnation and recession, ING economist Carsten Brzeski said.

France’s GDP rose 0.5 percent from the first quarter, when the second biggest economy in the euro area expanded just 0.1 percent, which was revised down from 0.2 percent, preliminary estimates from INSEE revealed. Economists were looking for 0.1 percent growth in the second quarter.

Foreign trade contributed 0.7 points to GDP growth as exports rebounded 2.6 percent. Imports posted a moderate 0.4 percent growth.

Meanwhile, household spending declined 0.4 percent on quarter and gross fixed capital formation rose only 0.1 percent. Moreover, inventory changes contributed negatively by 0.1 points.

Spain GDP posted 0.4 percent growth after rising 0.5 percent in the preceding period.

Major contributors to the Spanish growth were private consumption and gross fixed capital formation, while exports were a major drag.

Year-on-year, growth weakened sharply to 1.8 percent from 4.2 percent a quarter ago. The latest figure was also below economists’ forecast of 2.0 percent.

Preliminary GDP estimate for the euro area is due on July 31. The 20-nation currency bloc is forecast to grow modestly by 0.1 percent in the second quarter.

In the latest World Economic Outlook, the International Monetary Fund projected the German economy to shrink 0.3 percent this year before rebounding 1.3 percent in 2024.

At the same time, France’s economy is projected to grow 0.8 percent this year and 1.3 percent next year. The Spanish economy is set to log a more robust growth with GDP rising 2.5 percent in 2023 and 2.0 percent next year, the lender said.

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