Eurozone grows fast in Q4 as Germany expands
Print Edition
EUROZONE economic growth accelerated unexpectedly in the final quarter of 2014 as the bloc’s largest member, Germany, expanded at more than twice the expected rate.
A preliminary estimate showed the economy of the 18 countries sharing the euro grew by 0.3 percent between October and December compared with the previous three months, the European Union’s statistics office Eurostat said yesterday.
A Reuters poll of 51 economists had forecast a 0.2 percent expansion, the same rate as in the third quarter.
Year on year, eurozone growth was 0.9 percent in the fourth quarter, 0.1 percentage points higher than expected.
The eurozone’s biggest economy, Germany was a clear outperformer, growing by 0.7 percent in the quarter, far surpassing hopes of a 0.3 percent rise.
It marked a return to solid expansion in Germany after two quarters close to zero, boosting the growth rate for the whole of last year to 1.6 percent.
Domestic demand lifted Germany out of its mid-year lull and allowed it to achieve 2014 growth of 1.6 percent. The Statistics Office said a significant pick-up in household spending had helped overcome the summer slowdown.
“This is a thunderbolt,” UniCredit economist Andreas Rees said.
Grounds for optimism
“Some spoke of possible recession after the summer but instead Germany rebounded. The fact that the growth comes mainly from the domestic economy gives strong grounds for optimism.”
France could not keep pace, growing by just 0.1 percent, meaning the eurozone’s second largest economy rose by just 0.4 percent in 2014. Italy fared even worse.
“It’s obviously still too weak, but the conditions are ripe to permit a cleaner start of activity in 2015,” said French finance minister Michel Sapin, adding that business leaders were already beginning to increase investment.
On Monday, France’s central bank predicted first quarter growth of 0.4 percent, led by a rise in industrial production and a slight improvement in services activity.
With Greece’s place in the eurozone again uncertain, there is plenty of turbulence for the currency bloc to contend with.
But a halving of the price of oil and the prospect of the European Central Bank buying over 1 trillion euros (US$1.1 trillion) of government bonds with new money over the next 18 months should start to spur growth.
Latest data suggest a slightly more buoyant start to the year. The January purchasing managers survey produced the best showing for eurozone firms since mid-2014 and pointed to first quarter growth of 0.3 percent.
In Greece, the economy shrank by 0.2 percent in the final three months of last year after three straight quarters of growth. That marked a 1.7 percent rise from the same period a year earlier, but was below the 2.2 percent forecast.
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