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German, French GDP Growth Accelerated in 3rd Quarter

By Simone Meier and Francois de Beaupuy

Nov. 14 (Bloomberg) -- Economic growth in Germany and France, the euro region's two largest economies, accelerated in the third quarter as consumers stepped up spending.

German gross domestic product increased 0.7 percent in the third quarter from the second, when it expanded 0.3 percent, the Federal Statistics Office in Wiesbaden said today. In France, the economy expanded at the same pace in both quarters, according to national statistics office Insee in Paris.

European companies are boosting investment and hiring to meet export demand, encouraging consumer spending. With a surge in the euro making goods less competitive abroad and oil prices climbing to a record, the economy of the 13 nations sharing the euro is showing signs of cooling.

``The third-quarter spike in activity may prove the last hurrah for the euro-region recovery,'' said Stuart Bennett, a London-based strategist at Calyon. ``The strong euro remains an ever present threat to European exports as do higher energy and food prices to consumers' disposable incomes.''

The euro appreciated 0.5 percent to $1.4667 at 10:33 a.m. in Frankfurt. It has increased 11 percent this year, reaching a record $1.4752 on Nov. 9.

German and French economies both expanded in line with economists' expectations, two separate Bloomberg surveys showed. In Spain, Italy, Austria and the Netherlands, growth also accelerated in the third quarter.

Euro-Region Growth

The economy of the 13 nations sharing the euro probably expanded 0.6 percent in the third quarter after 0.3 percent growth in the second, according to a Bloomberg survey. Eurostat, the European Union's statistics office in Luxembourg, will publish that report at 11 a.m. today.

``Growth has picked up again'' after a ``slight weakening'' in the second quarter, German Economy Minister Michael Glos said today in statement. ``The German economy continues to be on a robust growth path.''

German companies stepped up spending on equipment and construction in the three months through September, and a ``moderate'' increase in consumer spending also supported growth, the statistics office said. Net trade didn't contribute to growth, primarily due to ``significant increase'' in imports, the office said.

In France, consumer spending rose 0.8 percent in the third quarter from the previous three months, when it grew 0.6 percent, Insee said today. Exports grew 1.7 percent in the third quarter, more than double the second quarter. Trade added 0.1 percentage point to growth after dragging it down by 0.3 points in the previous period.

Porsche Profits

Porsche AG, maker of the 911 sports car, said Nov. 12 full- year profit more than tripled to a record. Alstom SA, the world's third-largest power plant maker, said Nov. 8 fiscal first-half profit jumped 49 percent on increasing demand.

``There's still some confidence in Europe among manufacturers, maybe less so among financial companies'' because of toughening access to borrowing stemming from the U.S. mortgage crisis, Ernest-Antoine Seilliere, president of BusinessEurope, the European Union employers' federation, said in an interview on Nov. 13. ``We're getting close to a threshold where things may become darker.''

Still, the European Central Bank on Nov. 8 left borrowing costs at 4 percent, with President Jean-Claude Trichet saying that risks to growth are ``judged to lie on the downside.'' The European Commission on Nov. 9 cut its forecast for euro-region growth next year to 2.2 percent from 2.5 percent.

A 54 percent surge in oil prices this year is eroding the spending power of companies and consumers. Crude oil reached a record $98.62 a barrel on Nov. 7. It traded at $91.65 today.

German investor confidence fell in November to the lowest level in almost 15 years, the ZEW Center for European Economic Research in Mannheim said yesterday. In France, executive optimism fell to the lowest since May last month.

The German statistics office is scheduled to publish a detailed break-down of third-quarter GDP data on Nov. 22.