German GDP stuns, Europe shines, but it may be over

By Brian Love

PARIS (Reuters) - Stunning German growth and a surge in France produced a defiantly healthy showing from Europe when estimates of economic growth for the first three months of 2008 were published on Thursday.

Economists said that may be the end of it as Europe succumbs to an international downturn, but the news showed that, thanks to business investment, the region began the year in far better shape than the stagnating U.S. economy.

"Germany is doing quite well and we should raise a glass of the fizzy stuff to celebrate it. But it is not quite a new 'wunder'," said Bank of America economist Holger Schmieding.

There were worrying signs behind the headline news from Germany and France, notably weak consumer demand as soaring commodity prices push up the cost of fuel, food and other essentials.

The attention-grabber though was that German gross domestic product rose 1.5 percent from to last quarter of 2007, twice as fast as anticipated by economists and better than anything seen in 12 years.

Corporate investment was the main reason for the five-fold rise in the quarter-on-quarter growth rate from 0.3 percent in the last three months of 2007, the statistics office said. It did not provide a detailed breakdown.

After the German growth data, it was little surprise when the European Union's statistics office said growth for the euro zone as a whole beat forecasts, up 0.7 percent from the last quarter of 2007.

That contrasted with just 0.2 percent for the United States, using a measure comparable with the estimates published in Europe. The U.S. economy has been hit by a severe slump in house prices and the collapse of the subprime mortgage loan market after several years of unchecked spending.