Rabobank Group

4-12-2009 | Economic news

European economies are returning to growth, strongly facilitated by the recovery of world trade. The eurozone ‘G4’ all experience strong export growth in the third quarter, although this translates into positive net trade growth contributions only in France and Italy. German growth is saved by the turnaround in inventory formation, whereas the Spanish economy remains in recession for now.

Germany – Saved by the bell!
The rapid slowdown in the pace of destocking prevented the economy from re-entering recession. In the short-term, the Germany will continue to grow due to (i) the swing in the inventory cycle and (ii) the strength of external demand. But the expected weakening of external and domestic demand combined with the banking sector problems suggests risks to activity are still tilted to the downside.

France – GDP takes another shaky step forward
Third quarter GDP figures had France low in both the quarter-on-quarter growth and in year-on-year loss relative to the Euro zone. The 0.3% growth relative to the previous quarter was propped up by favourable developments in net trade and government consumption that are expected to fade out. Domestic demand remained depressed so it is far too early to talk about a sustainable development.

Italy – A mixed bag
Last month’s Italian macroeconomic data are a mixed bag. We are relieved that the recession has indeed ended in 09Q3, the economy posted 0.6% q-o-q volume growth. We are outright disappointed about the fact that the entire gain in industrial production posted in August has been wiped out in September, making for a rather weak footing for further recovery of industrial growth in 09Q4.

Spain – Last step down?
The Spanish economy didn’t manage to exit recession yet in the third quarter. Residential investment is set to exert a drag on economic growth for quite some time to come. Meanwhile, high import growth wiped out the positive effects of a rise in exports. With the end of recession in sight, the outlook on tough times ahead for is becoming all the more clear.

The Netherlands – Out of recession
After four quarters of contraction, GDP in the third quarter was up 0.4% on the second quarter. Officially the recession is over now. However, this positive quarterly figure is no guarantee for lasting growth. Bear in mind that the recession of the 1980s was characterized by alternating quarters of contraction and growth.

The Rabobank Economic Research Department follows, analyses and predicts financial and economic developments in the Netherlands and around the world.