Feb. 12 (Bloomberg) -- The German and French economies, the largest among the dozen euro nations, expanded for a second quarter in the final three months of last year as the euro region recovered from the slowest pace of growth in a decade.
German gross domestic product grew 0.2 percent from the third quarter, when it grew at the same pace, the Federal Statistics Office said. Economists surveyed by Bloomberg News expected a 0.3 percent increase, the median of 34 forecasts showed. The French economy expanded 0.5 percent, the fastest pace in six quarters.
U.S. and Asian growth led Europe out of a second-quarter contraction and has so far cushioned the effect of the euro's 20 percent gain against the dollar in the past year. Slower-than- expected German growth and the Bank of France's reduced forecast for the first quarter raise doubts about the recovery's strength.
``This pickup is completely imbalanced,'' said Florence Barjou, an economist at BNP Paribas SA in Paris, in a televised interview with Bloomberg News. ``Domestic demand, and consumer spending in particular, will have to take over from exports for growth to last.''
The reliance on exports increases the risk of a setback from the euro's appreciation. Exporters including Volkswagen AG, Europe's biggest carmaker, and consumer-goods maker Unilever NV have said the euro's ascent eroded sales growth last year.
`Dangerous Point'
``I think we are at a dangerous point quite frankly, that I think the (dollar's) decline has probably been too precipitous,'' said Unilever co-Chief Executive Niall FitzGerald an a televised interview with Bloomberg News. ``It's exporting some of the U.S. trade deficit problems and it's probably going to get in the way of a real recovery in Europe.''
The euro fell from its highest level in a month against the dollar after the GDP reports. The currency dropped to $1.2815 at 10:08 a.m. in London from $1.2833 in New York late yesterday.
The European Central Bank remains ``concerned about excessive exchange-rate moves,'' the Frankfurt-based bank said in its monthly report published today. Growth abroad ``can be expected to support foreign demand for euro area goods and services.''
Consumer spending has yet to reflect the increase in business confidence in both France and Germany. Executives in the two nations were the most optimistic in about three years in January and the European Central Bank predicts trade within the euro region will boost growth.
Dutch Recovery
The Dutch economy, the fifth biggest of the euro nations, registered its first quarter of expansion in more than a year in the three months through December, growing 0.3 percent from the previous quarter. GDP shrank 0.8 percent for the whole of 2003. Germany, France and the Netherlands account for more than half the $9 trillion economy of dozen nations sharing the euro.
Germany's economy, Europe's biggest, contracted 0.1 percent last year as consumer spending dropped. The government predicts growth of between 1.5 percent and 2 percent this year.
Household spending, which accounts for more than half of German GDP, is still a drag on the economy. German retail sales fell for a second month in December, and unemployment rose a seasonally adjusted 28,000 in January, the first increase since May. European consumer confidence stagnated last month.
``Exports alone cannot solve the economic problems in Germany,'' said Gunter Schall, economist at the BDI industry association, whose 107,000 members include DaimlerChrysler and Siemens AG. ``The question is will companies use their income from exports to invest in Germany? I am skeptical about that.''
Strikes Averted
Nationwide strikes in Germany's engineering industry may have been averted after the IG Metall labor union and the Gesamtmetall employers federation in the state of Baden-Wuerttemberg agreed on a 2.2 percent wage increase starting in March. Warning strikes had already disrupted production at companies including DaimlerChrysler AG and Porsche AG.
Chancellor Gerhard Schroeder is counting on labor-market changes, such as easing regulations on dismissing staff and a tightening entitlements to jobless benefits, as well as on tax cuts to help reduce unemployment and spur consumer spending. Schroeder has cut income tax cuts by 15 billion euros ($19.2 billion) this year.
German growth in the fourth quarter was bolstered by a ``relatively strong increase in domestic demand,'' the statistics office said. Domestic demand includes consumer and government spending and investment. The contribution to GDP from foreign trade fell, as imports rose at a faster pace than exports.
As in Germany, French optimism about accelerating growth hasn't fed through to hiring. France's unemployment rate increased to 9.7 percent in December, matching the 3 1/2-year high reached in September and October. That may have contributed to a slowdown in consumer spending in the fourth quarter.
Growth Forecasts
France's economy will probably grow 0.5 percent in the first quarter, the Bank of France said, slower than it forecast a month ago. The bank's leading indicators index, based on a monthly survey of about 12,000 companies, in January projected first- quarter growth of 0.7 percent.
German GDP will probably gain 0.4 percent this quarter, according to estimates by the DIW economic institute in Berlin. At least six reports so far this month -- from factory orders to services growth -- signaled that the recovery may have accelerated at the beginning of the year.
The ECB has ignored calls by business leaders including BDI head Michael Rogowski to lower interest rates to stem the euro's climb. ECB policy makers last Thursday left the main lending rate unchanged at a half-century low of 2 percent and board member Gertrude Tumpel-Gugerell told journalists on Tuesday a rate cut ``is currently not a topic.''
Rate Expectations
ECB officials next meet to set interest rates on March 4. Investors increasingly expects borrowing costs to remain unchanged until at least the middle of the year, interest rate futures contracts show.
The yield on a three-month contract for June settlement was 2.04 percent at 8:12 a.m. in Frankfurt, 19 basis points lower than at the beginning of the year. The current three-month rate is 2.07 percent.
The reports from Germany and France are first estimates and don't provide components of gross domestic product. Eurostat, the European Union's statistics office, will release a similar figure for the 12-nation euro region tomorrow at midday following figures from Italy at 10:30 a.m. in Rome.
O Clubeinvest.com informa que nenhuma da informação
aqui facultada deverá ser entendida como conselho ou recomendação
de qualquer tipo de transacção ou investimento.
