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UPDATE 2-German rebound slows but broadens in Q3

By Sarah Marsh and Annika Breidthardt BERLIN, Nov 12 (Reuters) - German economic growth slowed in the July-September period but the upswing in Europe's largest economy is now on a broad and firm footing, pointing to solid, if unspectacular growth in coming quarters. Gross domestic product grew 0.7 percent in the third quarter, according to preliminary quarter-on-quarter data from the Federal Statistics Office released on Friday, exactly in line with the Reuters consensus forecast. That was a sharp slowdown from the April-June period, as a gloomy global outlook still casts a shadow over exports. Second-quarter growth was revised up 10 basis points to 2.3 percent, the fastest rate in reunified Germany. "Positive impulses came both from the domestic side as well as from abroad," the Statistics Office said in a statement. The expansion was driven equally by private and public spending, investment and trade, the office said. "The slowdown is no cause for concern. The upwards trend is still in place, in part due to the fact the economy is now on a broader footing. We think the economy will continue to recover in coming quarters," said Alexander Krueger of Bankhaus Lampe. "High competitiveness is one of the reasons for this, which is helping exports to grow strongly, which in turn is also helping to boost domestic demand," Krueger added. ON TWO LEGS NOW "The quality of growth has improved. The German economy is no longer just standing on one leg -- exports," said Andreas Rees, an economist at Unicredit.

"By the first or second quarter of 2011 we'll have reached the pre-crisis level.

A few months ago no-one would have thought that would be possible," he added. Germany suffered its biggest postwar recession in 2009 when the economy contracted by 4.7 percent. Driven by exports and helped by stronger-than-usual consumer sentiment, it has emerged from the slump -- leaving behind some euro zone peers. Austerity measures to slash the deficit are squeezing economic activity in a number of European states. But Germany's economy is proving more resilient than others so far to budget cutbacks, a subdued global trade environment and a strong euro. Germany's economy -- the driver of euro zone growth -- is expected to expand by 3.4 percent this year and by 1.8 percent in 2011, according to government forecasts last month. WIDER GAP Output data from a number of euro zone countries on Friday should show the debt crisis is widening the gaps between economies such as Germany and France and those still struggling to cut their debt and secure growth. France's economy grew 0.4 percent in the third quarter, slowing from growth of 0.7 percent in the second quarter, preliminary data showed on Friday. By contrast, in debt-laden Greece, the economy probably slumped by 1.4 percent in the third quarter, slowing from the previous three months' 1.8 percent fall. Spain's economy stagnated in the third quarter, lagging behind the euro zone core and fuelling prospects of a prolonged period in the doldrums with robust exports overshadowed by persistently weak domestic demand. Data are also due from the currency bloc as a whole at 1000 GMT, with growth expected to have slowed to 0.4 percent quarter on quarter from a 1 percent increase in the second quarter. German businesses are still profiting from the rebound. The blue chip DAX index has gained 13 percent since the start of the year, and of the 30 companies in the index, 20 beat market expectations with their earnings in the quarter to end-September and 15 hiked their outlooks. Siemens, Europe's biggest engineering firm, has signalled its confidence with a proposed sharp rise in dividends and a promise of profit growth driven by emerging markets. Year-on-year, the German economy grew by 3.9 percent in the third quarter, the data showed. This followed a revised 4.3 percent expansion in the April-June period and beat expectations for a 3.7-percent growth year on year. (Additional reporting by Dave Graham; editing by Giles Elgood) Keywords: GERMANY GDP/ (annika.breidthardt@thomsonreuters.com; +49 30 2888 5166; Reuters Messaging: annika.breidthardt.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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