France and Germany drift out of recession. The rest of Europe is stuck in the doldrums

AT LAST, a fairer wind. Figures released on Thursday August 13th showed that the euro area’s GDP shrank by just 0.1% in the three months to the end of June, far less than the 2.5% slump in the previous quarter. The near stability was the result of an early exit from recession in the region’s two largest economies. The economies of both France and Germany grew by 0.3% in the quarter, surprising analysts who had expected the figures to show small contractions in output for both. As badly as these economies have suffered in the past year, there will be some pride that the economies have started to grow before those of America or Britain. Britain’s economy shrank by 0.8% in the second quarter, although it is likely to recover somewhat in this one.

Germany and France have started moving again for similar reasons. Consumer spending picked up, helped by government subsidies for car sales. Foreign trade also helped. In France it added 0.9 percentage points to GDP, accounting for all and more of the growth in the quarter; in Germany exports fell but by less than imports, so the overall contribution of trade was positive. Firms were still running down stocks in both France and Germany. That augurs well for recovery, at least in the near term. As confidence strengthens businesses will restock, which should further fill the sails of the economy in the current quarter. Orders for German manufacturers are picking up, helped in part by China’s state-sponsored investment boom. …