France slipped into its third recession in four years as Germany barely went into positive territory, underperforming general expectations.
The Financial Times reports France contracts in 1st quarter as Germany returns to growth
French GDP shrank by 0.2 per cent in the first quarter, the same rate of decline as the final three months of 2012, according to Insee, the national statistics office. Investment, measured by gross fixed capital formation, remained weak, falling a further 0.9 per cent after 0.8 per cent in the fourth quarter. Exports fell and construction output fell.
The second consecutive quarter of contraction put France back into recession, its third in four years.
Germany, by contrast, managed to swing back into growth, but only barely. First-quarter GDP grew by 0.1 per cent, up from a downwardly revised contraction of 0.7 per cent in the fourth quarter of last year, according to a preliminary estimate by the Federal Statistics Office.
The German growth figures were likely to have been dragged down by poor weather and many economists are expecting it to continue to grow as exports pick up.
The country’s powerful engineering union, which includes the carmaking sector, agreed a pay deal with employers on Wednesday, giving workers a pay rise of 3.4 per cent in July and a further 2.2 per cent in May 2014.
It’s Not the Weather
Blaming the German slowdown on the weather is complete silliness.
More importantly, the idea that German exports will rise given stated pay raises and a weak and weakening eurozone economy is absurd.
For more on the eurozone, and France in particular, please see Social Mood Darkens in Europe, Especially France, as Eurozone Economy in Freefall.
Mike “Mish” Shedlock