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Thursday, 23 May, 2002, 09:55 GMT 10:55 UK
Germany's recession ends
German construction worker
Germany's construction sector is stabilising
Economic growth has returned to Europe's biggest economy, Germany after six months of recession.

The news comes ahead of figures due out on Friday which are expected to show that the French recovery is well underway too.

The German and French economies account for about half the output of the eurozone.

The German economy grew 0.2% in the first three months of 2002, mainly thanks to a strong rise in exports, the Germany's Federal Statistical Office said.

"These are the first indications that the expected upturn has started," the German Finance Ministry said.

Germany's economy shrank 0.3% in the final three months of last year and 0.2% between July and September 2001.

Political advantage

The growth rate was roughly in line with predictions from Germany's central bank three days ago.

Those predictions were seized on by Chancellor Gerhard Schroeder - who faces an election in November - as heralding a fall in unemployment.

According to the latest figures, the prospects for economic growth this year appear bright.

There is little inflationary pressure with consumer prices rising 1.8% during the first three months of the year.

"The basis for a tension-free economic growth this year is favourable," the Federal Statistical Office said.

Remaining weakness

However, although there were "signs of a stabilisation in the construction sector", other parts of the economy remained troubled.

Manufacturing investments and consumption expenditures of private households "clearly declined" during winter and domestic demand remained "weak".

And although the economy grew during the first three months of the year, Germany's gross domestic product remained 1.2% below the level it reached 12 months ago.

Across the border

Germany's embryonic recovery has further raised hopes that the French economy is also on the way back.

Economists expect figures out on Friday to show that the economy grew by 0.4% during the January to March period, after shrinking by 0.3% in the October to December quarter.

New figures out on Thursday supported such optimism.

Spending by French consumers rose 0.8% in April from March, up 4.2% on April 2001, the national statistics office INSEE said.

"This is very good and it's also surprising," said UBS Warburg economist, Stephane Deo.

"If consumer spending is high in France it's thanks to the high level of savings and stabilisation of the jobless rate."

See also:

23 May 02 | Europe
15 May 02 | Business
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