Article / 14 November 2013 at 8:32 GMT

German GDP meets expectations, but French miss on investment

Head of Macro Strategy / Saxo Bank

German GDP grew in line with expectations at a 0.3 percent quarter-on-quarter clip in the third quarter, while France missed a benign flat expectation to print -0.1 percent. We expect the divergence between the two euro area giants to widen in the coming years.


German growth continues: The German economy continues to perform if not spectacularly, then satisfactorily at least. Following a large 0.7 percent increase in GDP in Q2, the Germans followed it up this morning by announcing that Q3 growth had matched expectations of 0.3 percent to take the year-on-year growth rate to 0.6 percent from 0.5 percent earlier (workday adjusted). Today's initial Q3 GDP estimate is without details, but the statistics office noted that growth was driven exclusively by domestic demand, in particular construction and investment. We expect this to continue in the coming quarters as German competitiveness eases slightly due to rising (real) wages keeping net exports in check, while allowing Germans to spend more on goods, domestic and foreign, bolstered by strong household balance sheets. Construction will be supported by a housing market that has plenty more room for growth.

 France GDP components

French economy takes a step back: The second-largest economy in the euro area failed to repeat its performance from Q2 — far from it, in fact. After growing by 0.5 percent in Q2, the economy shrank by 0.1 percent in the third as cautious investment behaviour by businesses put pressure on the economy. While most of southern Europe has implemented reforms to a degree, the same cannot be said of France and the environment remains unconstructive for doing business. Therefore, the weakness in investment, which declined 0.6 percent quarter-on-quarter is no surprise — and has, in fact, declined for seven straight quarters for a investment loss of 4.9 percent. Until President François Hollande does something about the unhealthy business climate, which is only worsened by falling competitiveness, I fail to see how France can return to anything other than modest growth.


— Edited by Felicity Glover


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