FRANKFURT - German economic growth rebounded in the third quarter on stronger consumer and company spending, even as the region's debt crisis threatens to damp the recovery.

GDP in Europe's largest economy, adjusted for seasonal effects, rose 0.5 percent from the second quarter, when it increased a revised 0.3 percent, the Federal Statistics Office in Wiesbaden said on Tuesday. From a year earlier, GDP increased 2.5 percent. The French economy, Europe's second-largest, expanded 0.4 percent in the period.

Germany is helping to support eurozone growth as economies from Greece to Italy struggle to contain an escalating debt crisis that may tip Europe back into recession. The Spanish and Belgian economies stalled in the three months through September, while Portugal's contracted for a fourth straight quarter.

"The third quarter in Germany was better than what we can expect for the fourth because it will be affected by recessions in other important euro countries," said Holger Sandte, chief economist at WestLB Mellon Asset Management in Dusseldorf. "Exports are slowing, investment is weakening, and we're in for a mild recession, stagnation at best, over the winter."

The 17-nation eurozone probably expanded 0.2 percent in the third quarter, a Bloomberg survey of economists shows.

Stagnant profit

The German statistics office revised second-quarter growth from an initially reported 0.1 percent. It said household spending was the main driver of growth in the third quarter, with company investment in plant and machinery also making a positive contribution. Rising exports were offset by imports so that net trade barely affected GDP. Construction activity declined somewhat in the quarter, the office said.

Siemens AG, Europe's largest engineering company, last Thursday forecast stagnant profit for next year as sales growth moderates and the global economy cools. K+S AG, Europe's largest producer of potash, pared its outlook for sales and profit this year and next as economic volatility prompts wholesalers to scale back orders.

"Once the eurozone falls into recession, it will also have an impact on German exports and economic growth," said Ulrike Rondorf, an economist at Commerzbank AG. "The depth of the German slowdown will depend on how the crisis in the euro area develops."

Confidence declines

German business confidence fell to a 16-month low in October, unemployment rose for the first time in more than two years and factory orders dropped for a third month in September, recording the longest streak of monthly declines since the collapse of Lehman Brothers Holdings Inc.

Heidelberger Druckmaschinen AG announced last week that it will cut employees' working hours in the second half of the year. Wincor Nixdorf AG is currently considering such a move.

Chancellor Angela Merkel's economic advisers forecast last Wednesday that German growth will slow to 0.9 percent next year from 3 percent in 2011.

Industrial companies will find it "difficult" to maintain output over the next six months amid weaker demand, the Bundesbank said in its latest monthly report. "Businesses have again scaled back their expectations and the inflow of new orders, especially from abroad, has lessened noticeably" after "strong" economic growth in the third quarter, it said.

Bloomberg News

(China Daily 11/16/2011 page16)