The euro area’s two largest economies returned to growth in the third quarter, signaling that a slow recovery may have taken hold in the region.

German gross domestic product rose 0.1 percent in the three months through September and France’s (FRGEGDPQ) jumped 0.3 percent, the most in more than a year. Economists surveyed by Bloomberg News predicted growth of 0.1 percent for both economies, and see the same rate of expansion for the 18-nation region. Italy remained a weak spot, shrinking for a second quarter.

The euro area’s fragile recovery has been in peril since economic malaise took hold of countries in the region’s core. With the revival stuttering and inflation close to the lowest level in five years, the European Central Bank has deployed unprecedented stimulus and urged governments to invest and deliver structural reforms to support growth.

It’s a “positive surprise at the margin,” said Frederik Ducrozet, an economist at Credit Agricole CIB in Paris. The ECB “should take comfort from the fact that domestic demand has remained resilient and consistent with a slightly stronger momentum going into year-end.”

The euro was down 0.1 percent at $1.2462 as of 10:25 a.m. Frankfurt time. The Stoxx Europe 600 Index fell 0.1 percent, while Germany’s DAX Index was little changed.

Weak Recovery

The euro-area economy probably expanded 0.1 percent last quarter, according to a separate survey. That report is due from the European Union’s statistics office in Luxembourg at 11 a.m.

Italian GDP (ITPIRLQS) fell 0.1 percent in the three months, marking a 13th quarter in which the euro region’s third-biggest economy failed to grow. The Bank of Italy said yesterday that the country needs to avoid a “recessionary demand spiral” due to the “persistence of economic difficulties, which have been exceptional in terms of duration and depth.”

In the Netherlands, GDP rose 0.2 in the three months through September, less than economists forecast, after a 0.6 percent increase the previous quarter.

“The recovery is continuing, but it is a very weak recovery, which will remain slow,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “The euro-zone problems can’t be solved in one quarter, they are a long-term problems.”

In Germany, third-quarter growth was driven by private consumption, with a small contribution from net trade, the country’s statistics office said. Equipment investment dropped significantly while construction also fell. Inventories contracted markedly in the period, according to the report. A full data breakdown will be published on Nov. 25.

German Outlook

The German government cut its growth forecasts last month, saying the economy will expand 1.2 percent this year and 1.3 percent next year. Angela Merkel’s council of economic advisers also slashed its projections, urging the Chancellor to spur growth and investment to retain competitiveness.

While some support to growth may have come from the euro, down almost 11 percent since early May, and oil prices, which have fallen more than 25 percent in the same period, sanctions against Russia over its involvement in Ukraine have damped exports. EON SE (EOAN), Germany’s biggest utility, reported a wider third-quarter loss than last year, as a weaker ruble crimped earnings from Russia and power prices declined.

“The downward pressure from the global economy might be less drastic than generally feared,” said Andreas Rees, chief German economist at Unicredit MIB in Frankfurt. “The million-euro question is how persistent the slowdown will be. We think that there are good chances of only a short-lived one, given a robust U.S. economy, a weaker exchange rate and a lower oil price.”

French Economy

The German government’s reluctance to boost spending and investment is driven by a pledge to balance the budget by next year. That aim stands in contrast to the outlook for France, where the shortfall is seen rising to 4.7 percent of GDP in 2016, the highest in the European Union for that year.

Adding to the woes of President Francois Hollande, whose popularity is at record lows, unemployment is at 10.5 percent, compared with 5 percent in Germany.

French third-quarter expansion was driven by an 0.8 percent jump in public spending while investment fell for a fourth straight quarter. Overall domestic demand contributed 0.2 points to growth, while external trade wiped the same amount off. Inventory building added 0.3 points.

“We see little in the data to make us significantly more positive on France,” said Francois Cabau, European economist at Barclays Plc in London. The investment slump “seems unlikely to reverse into positive territory as long as confidence stays at such low levels.”

Draghi’s Commitment

Economists surveyed last month predicted inflation in the euro area will average 0.6 percent this quarter, compared with the ECB aims to keep annual price gains just below 2 percent.

Policy makers, who this month endorsed President Mario Draghi’s commitment to boost the ECB’s balance sheet toward early-2012 levels, have charged the institution’s staff with preparing further monetary stimulus to be implemented if needed. Since June, the ECB has cut rates twice, offered long-term loans to banks and started asset purchases.

“Monetary policy has done and will continue to do its part,” Draghi said in Rome on Nov. 12. But even if combined with a fiscal policy, it is “not enough to generate a revival of strong and sustainable growth without the necessary structural reforms,” he said.

Bloomberg