Nov. 13 (Bloomberg) -- Germany and France, which account for about half the economy of the dozen nations sharing the euro, returned to growth in the third quarter as a global economic recovery stoked demand for exports. German gross domestic product grew 0.2 percent from the second quarter, when it shrank a revised 0.2 percent, the Federal Statistics Office in Wiesbaden said. The French economy expanded a greater-than-expected 0.4 percent in the same period, after shrinking 0.3 percent in the second quarter. ``A recovery is certainly imminent in some important export regions: the U.S., Southeast Asia and eastern Europe,'' Dietmar Harting, president of the ZVEI electronics industry group, whose 1,400 members include Siemens AG and Sony Corp.'s German unit, said in an interview. Exports are equivalent to about a third of Germany's GDP. The U.S. economy, which buys about a fifth of Europe's exports, grew at the fastest pace in almost two decades in the three months to September. Rising foreign demand boosted Germany's trade surplus to a record in September and helped earnings at Bayerische Motoren Werke AG, the world's second-biggest maker of luxury cars.
Germany's statistics office said GDP expanded last quarter as exports rose ``strongly'' and imports fell. That more than offset a slowdown in demand at home, it added. From a year ago, the economy shrank 0.2 percent, the report also showed. Deutsche Telekom AG, Siemens AG, BASF AG and RWE AG, four of Germany's biggest 15 companies, all reported quarterly earnings that exceeded analysts' forecasts today. Deutsche Telekom, the biggest phone company and RWE, Europe's third-biggest utility, both raised their full-year earnings forecasts.
European Recovery
European stocks rallied to the highest in at least 11 months on Friday, after falling to a seven-year low in mid-March. Italy's economy probably grew 0.2 percent last quarter, the median forecast of economists surveyed by Bloomberg News expect a government report to show tomorrow. That makes it more likely that the $8 trillion economy of the dozen nations sharing the euro resumed growth, after shrinking in the second quarter. Germany, France and Italy account for almost 70 percent of the $8 trillion economy of the dozen euro nations. The region's probably grew 0.2 percent in the third quarter, according to the median forecast of 25 economists surveyed by Bloomberg News. Eurostat, the European Union's statistics office, will release the report tomorrow at noon in Brussels. In Germany, at least nine reports in the past four weeks have signaled a recovery has begun. The government's panel of economic advisers, the so-called ``Five Wise Men,'' expects growth of as much as 1.7 percent next year, helped by income-tax cuts worth about $25 billion, after no expansion this year.
ECB Interest Rates
The European Central Bank has lowered interest rates for the euro zone seven times since 2001 to the lowest level in more than half a century. For Germany, they are the lowest since 1876, when Otto von Bismarck was chancellor. ``We are pretty optimistic about the economy for the next quarters,'' said Conrad Mattern, chief economist at Activest Investment in Munich, which manages the equivalent of $50 billion. ``Monetary policy is pushing back pessimism and people are starting to invest again as the global economy gets going.'' The ECB has said it's seeing increasing signs of a European recovery, fuelled by growth in the U.S. and Japan. The U.S. economy grew an annualized 7.2 percent in the third quarter. Japan's economy probably grew for a seventh quarter in the same period, the longest expansion in more than six years. The median forecast of 37 economists surveyed by Bloomberg News expects a report tomorrow to show that the world's second-largest economy expanded 0.3 percent.
`Clearly Making Progress'
``New data and new information show that recovery of the world economy is clearly making progress,'' ECB President Jean-Claude Trichet said at a press conference on Nov. 6. ``For the euro area the indicators are showing some improvement of economic activity in the second half of the year.'' Policy makers, including Finland's Matti Vanhala and Spain's Jaime Caruana, have signaled that they are prepared to leave borrowing costs at 2 percent to give the region time to recover. The euro's 15.7 percent appreciation against the U.S. dollar in the past year may have held back economic growth in Germany, where profit at companies including Volkswagen AG was curbed by exchange rate fluctuations. The single currency rose to a record of $1.1933 in late May and cost $1.1675 at 9:02 a.m. in Frankfurt. ``We are looking at an exchange rate of $1.15 as far as our plans for 2004 are concerned,'' Udo Stark, chief executive officer of engineering company MG Technologies AG, said in a Bloomberg TV interview on Monday. ``The economy is still weak, but looking into 2004, there is more reason for hope.''
Tax Cuts
Consumer spending remains the sore spot of the German economy, as unemployment rose to a 4 1/2-year high earlier this year and retail sales haven't gained since June. Chancellor Gerhard Schroeder is negotiating with the opposition to bring forward income tax cuts by one year to 2004. French consumer demand is picking up after stagnating in the second quarter on concern about rising unemployment. Spending by consumers, which accounts for more than half France's GDP, rose in September by the most in more than four years, led by sales of carmakers Renault SA and PSA Peugeot Citroen. Investors reckon the ECB may raise interest rates from the second quarter of next year the earliest, Euribor futures contracts show. The yield on a March three-month lending rate was at 2.36 percent at 7:43 a.m. in Frankfurt, compared with a current three- month lending rate of 2.17 percent. Germany's Wiesbaden-based statistics office will today release an estimate of third-quarter GDP. The full report will be released on Nov. 20. //www.bloomberg.com