THE TAKEAWAY: German Q1 GDP stronger than expected -> French data weaker -> Euro spikes intraday but rally limited by global concerns
The German economy grew five times more than expected in 2012’s first quarter, the German stats bureau said today. Gross domestic product expanded 0.5% on the quarter versus the expected 0.1% increase, while the yearly number came in at 1.7% versus the expected 0.9%. Exports to emerging markets led increases and offset falling demand in Europe. Germany is Europe’s largest economy and largely the EU’s paymaster.
The encouraging German number was tempered by a weaker than expected reading out of neighboring France. French economic growth remained stagnant in Q1, and was weaker than expected on the year.
The new French leadership under Francois Hollande is expected to work with German officials to stimulate growth in the 17-member Euro area, although differences between the two countries have recently emerged.
Meanwhile, the uncertain results of the Greek election and the inability of Greek leaders to form a stable government has thrown markets into limbo and cast doubts on Greece’s future with the Euro. A Greek exit would cause European governments to lose huge sums of money lent to Greece, and wouldlikely throw the entire region into economic turmoil.
The Euro found bids on the data, spiking towards 1.2855 after taking heavy losses earlier in the week.