Receding recession: Germany, France return to growth

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To stock market bears everywhere, this must all seem like a huge conspiracy.

Less than a week after the U.S. reported its smallest monthly net loss of jobs in a year, Germany and France today reported that their economies grew slightly in the second quarter -- defying predictions of further contraction.

From Reuters:

Germany and France achieved a shock return to economic growth in the second quarter of the year, ending their recessions earlier than many policymakers and economists expected, but failed to drag the euro zone with them.

German gross domestic product rose by 0.3% in the second quarter, bringing an end to the country’s deepest recession since World War II. French GDP also grew by 0.3% in the quarter.

The consensus in a Reuters poll of economists had predicted a 0.3% quarterly contraction in both countries.

But in the 16-nation euro zone, GDP slid by 0.1% on the quarter, following a 2.5% drop in the first quarter. That, though, was well above the 0.5% fall forecast before the French and German figures were released.

‘Looking forward, we think that the [euro zone] economy will increasingly benefit from the pick up in the global economy and the fact that the most aggressive phase of [inventory] destocking is now behind us,’ said Nick Kounis at Fortis Bank.

‘The big picture will be one of ongoing gradual recovery through 2010.’

That’s the bullish line, and investors still are buying it: The German stock market’s DAX index rose nearly 1% today on the GDP data. The DAX is up 12.3% this year, slightly better than the 11.3% gain in the U.S. Standard & Poor’s 500 index.

The French stock market’s CAC index added 0.5% today and is up 9.5% this year.

The euro is rallying against the dollar, rising to almost $1.43 from $1.421 on Wednesday.

The U.S. economy was still contracting in the second quarter: It shrank at a 1% annualized rate in the period, the government reported last month. But the Federal Reserve said Wednesday that it believed the economy was ‘leveling out.’

-- Tom Petruno