France and Germany Lift European Economy

FRANKFURT — The European economy bounced back with unexpected strength in the second quarter after contracting sharply at the beginning of 2009, data released Thursday showed, offering the clearest evidence yet that a searing recession is drawing to a close.

The economy of the 27-nation European Union shrank at an annual rate of 1.2 percent in the three months that ended in June, while the 16 countries that use the euro, the common European currency, registered an annualized 0.4 percent decline in economic activity during the period. That contrasted with a shrinkage at an annual pace of 1 percent during the same period in the United States.

Despite being in negative territory, the European data underscore a sharp recovery from the first quarter of this year, when both the E.U. and the euro zone saw a 2.5 percent contraction, or a 10 percent annual rate. Underlying the surprisingly strong reading were solid performances in France and Germany, both of which grew by 0.3 percent in the second quarter, compared to the first, government data showed Thursday.

Germany, Europe’s largest economy, will still probably see its gross domestic product contract by about 6 percent for the full year, economists say. But the surprise expansion — most economists had expected a flat or slightly negative reading — underscores how German exporters are benefiting from growth in Asia and what may be a bottoming of the downturn in the United States.

“An export-driven, ‘V’-shaped recovery in the second half of this year is in the pipeline,” said Andreas Rees, chief German economist at UniCredit.

Germany’s economy expanded 0.3 percent from the previous quarter, ending a run of four straight quarters of contracting output in Germany, putting an end to the nation’s recession in its most technical sense. The modest expansion in the second quarter amounted to an annual growth rate of 1.2 percent. link.....