Euro Recovery Wanes as Germany Slows and France Contracts

<div xmlns='http://www.w3.org/1999/xhtml'><p>Germany's economy lost momentum in the third quarter and France unexpectedly contracted, adding to evidence that the euro region's recovery is flagging.</p><br /><p>German GDP rose 0.3 percent from the three months through June, when it increased by 0.7 percent. That's in line with the median of 41 estimates in a Bloomberg News survey. The French economy unexpectedly contracted 0.1 percent. The European Union's statistics office in Luxembourg is due to publish third-quarter data for the euro area at 11 a.m. Economists predict growth slowed to 0.1 percent from 0.3 percent in the second quarter.</p><br /><p>The slowdown in the region's two largest economies bears proof that the 17-nation currency bloc is still struggling with the legacy of its debt crisis. Euro-area unemployment stands at a record 12.2 percent and the European Central Bank cut its benchmark rate to a record low of 0.25 percent last week to fight low inflation and rekindle growth.</p><br /><p>'French data are a grave disappointment and an indicator that the euro crisis isn't over,' said Andreas Scheuerle, an economist at Dekabank in Frankfurt. 'The region's recovery remains a fragile affair. German's performance is alright but growth is by no means sparkling.'</p><br />German Demand<br /><p>German growth in the third quarter was driven exclusively by domestic demand, the Federal Statistics Office said today. Investment in equipment and construction increased, and private and government consumption rose slightly, according to the report. Net trade damped output in the three months through September as imports gained and exports stalled.</p><br /><p>France's contraction underlines the issues President Francois Hollande is confronting as he tries to revive the economy and reverse an increase in unemployment that's at a 14-year high. Facing taxes equivalent to 46 percent of GDP, companies such as Cie de Saint Gobain SA are cutting investment spending or holding off raising it.</p><br /><p>'We're at the moment where the economic machine is re-starting,' French Finance Minister Pierre Moscovici said on RTL radio after the report. 'We knew the third quarter would be a pause. It's not a surprise, it's not an indication of decline.'</p><br /><p>With the French economy back to contraction, Germany continues to be the driver of growth in the 17-nation euro area. Economists predict the Italian economy, the bloc's third-largest, contracted 0.1 percent in the third quarter. The report is due at 10 a.m. in Rome.</p><br /><p>'We are seeing a slowdown in the pace of recovery,' said Frederik Ducrozet, senior euro-area economist at Credit Agricole CIB in Paris. 'Germany will likely remain one of the strongest reasons for growth in Europe.'</p><br /><p>To contact the reporters on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net; Jeff Black in Frankfurt at jblack25@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net</p><br /><p>To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net</p><br /><p>Enlarge image <img src="http://www.bloomberg.com/image/iyakxpq6iej8.jpg" width="600"/> </p><br /><img src="http://www.bloomberg.com/image/ikwjQnDSUBuk.jpg" width="600"/></div>

Business Euro Recovery Wanes as Germany Slows and France Contracts

Germany's economy lost momentum in the third quarter and France unexpectedly contracted, adding to evidence that the euro region's r...

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