The French and German economies both grew by 0.3% in the three months to June, according to official data released today, bringing to an end their year-long recession. Admittedly the news seems to have taken everyone by surprise, including the respective governments – and it probably doesn’t bode well for anyone planning a Continental break this August. But it does rather give the lie to the UK government’s claim that Britain was better placed to recover from the recession than any other big country...
It’s the first time in five quarters that France and Germany have enjoyed economic growth, and it technically means they’re out of recession (although since a recession is defined as two consecutive quarters of shrinkage, it seems like cheating for it to stop after just one quarter of growth). Unlike us, the Germans run a massive trade surplus, and they benefited from a big jump in exports in June (up 7%). France has also seen foreign trade start to creep up, while consumer spending strengthened in both countries, helped by the various state stimulus packages.
In fact, that’s the only slight caveat about today’s figures: they might well have a lot to do with these fiscal boosts. After all, if you start pumping an unprecedented amount of money into the economy, it’d be a poor show if you didn’t see some growth somewhere. And prospective UK holiday-makers might not see the bright side either: if the rest of Europe starts recovering at a faster rate than the UK, presumably the euro will rise against the pound, making your pain et vin a bit more pricey. However, the picture's complicated by the fact that the rest of the Eurozone isn't bouncing back as fast as France and Germany - overall it shrank by 0.1% last quarter, which may explain why sterling inched up this morning (despite Mervyn King’s gloomy prognostications yesterday).
Still, today’s news from across La Manche took economists by surprise. Even the French government didn’t bother trying to claim they’d seen it coming. ‘The data is very surprising,’ admitted French finance minister Christine Lagarde. ‘After four negative quarters, France is coming out of the rouge,’ she (nearly) said. Somehow we can’t quite see the UK government being quite so honest if the same thing happened there – ministers would be queuing up to take credit for it.
In fact, correct us if we’re wrong, but we’re pretty sure we remember Gordon Brown and co telling us that Britain was best-placed of all the big economies to recover from the recession. So it’s a bit galling to find ourselves well and truly in the slow lane. Although President Sarkozy will be feeling pretty smug: he’s been insisting all along that his approach was more sensible than Gordon’s, and it looks like he might yet be right...
In today's bulletin:
France and Germany growing again - as UK trails behind
Soaring pension deficit threatens to cripple FTSE firms
Saving the high street - on a £50k budget
Nietzschean SMEs say they will be better for the recession
Investors doomed to declining dividends