Germany Beats Growth Estimates With France Amid Recovery

Growth in Germany, France and the Netherlands beat economists’ estimates in the fourth quarter and Italy resumed expansion in a sign the fragile euro-area recovery is gaining traction.

German gross domestic product rose 0.4 percent from the third quarter, when it increased by 0.3 percent. Economists forecast growth of 0.3 percent, according to a Bloomberg News survey. GDP rose 0.3 percent in France and 0.7 percent in the Netherlands, while the Italian economy grew 0.1 percent.

The data bode well for the euro area, which has struggled to sustain its recovery. European Central Bank President Mario Draghi signaled last week that policy makers are considering more stimulus to rekindle growth, safeguarding the still-fragile economic revival that has started in some of the most-troubled countries in the region.

“These data confirm our outlook and that of the ECB that we are in recovery mode,” said Thomas Harjes, senior European economist at Barclays Plc in Frankfurt. “It might not be a strong recovery but we are heading in the right direction.”

The euro jumped a quarter of a cent after German figures were published and traded at $1.3699 at 10:18 a.m. in Frankfurt.

Italy’s Struggle

Eurostat, the European Union’s statistics office, will publish figures for the euro area at 11 a.m. in Luxembourg today. Economists forecast GDP rose 0.2 percent at the end of last year.

Fourth-quarter growth in Germany, Europe’s largest economy, was driven primarily by net trade, the statistics office said. Exports rose “much more strongly” than imports, it said. Government consumption stagnated at the end of last year and private consumption declined “slightly,” while there was an increase in investment in equipment and construction.

“German economic conditions are very healthy,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In the last quarter, uncertainty related to the euro-area debt crisis has receded and that might encourage some more investment down the road. Therefore, we expect further momentum to build in the economy.”

Growth in France, the region’s second largest economy, also exceeded economists’ expectations in the fourth quarter. The median forecast was for an expansion of 0.2 percent.

Going forward, the French government is counting on its plans for the payroll-tax cut to revive investment and bolster growth after President Francois Hollande failed to meet a promise to reverse an increase in jobless claims last year. Unemployment stood at 10.8 percent in December, more than twice as high as in Germany, according to Eurostat calculations.

Italy’s Struggle

Italy’s economy, the region’s third-largest, performed in line with economists’ estimates at the end of last year. Even so, the planned resignation of Prime Minister Enrico Letta today may lead to renewed political instability, jeopardizing reform efforts.

Spanish growth accelerated to 0.3 percent in the fourth quarter from 0.1 percent, while the Dutch economy grew more than twice as much as forecast.

“Fourth quarter growth numbers are encouraging,” Dutch Economy Minister Henk Kamp said at a press conference in The Hague today. “Not only exports increased on an annual basis, investments also grew. That gives us a positive feeling for this year.”

‘Very Healthy’

In a sign of German economic health, last month’s car sales rose the most since September 2011. Bayerische Motoren Werke AG, Audi AG and Mercedes-Benz, a unit of Daimler AG, the country’s three largest luxury-car producers, all delivered record numbers of vehicles last year and plan on further growth in 2014.

Business confidence in the country is at the highest level in 2 1/2 years and the Bundesbank predicts the German economy will grow “strongly” in the coming months. Manufacturing expanded for a seventh month in January, according to a survey of purchasing managers, and declining joblessness is hinting at a pickup in consumption.

Germany’s federal government raised its 2014 growth projection to 1.8 percent this week from 1.7 percent, citing increasing domestic demand fueled by higher employment. The ECB predicts an expansion of 1.1 percent in the euro area, followed by growth of 1.5 percent in 2015.

“It looks like we’re going into the first quarter with fairly strong momentum,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “That means we can be a bit more optimistic for this year. We’ve come a long way and this may be the silver lining for the ECB. But, of course, it is a gradual recovery.”

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