Eurozone growth hit unexpectedly at end of 2009
Output of goods and services stalled in final quarter, according to OECD
THE euro-area economy unexpectedly stalled in the final three months of last year, according to latest estimates, with output of goods and services showing no growth from the previous quarter.
The figures came as the Organisation for Economic Cooperation and Development (OECD) forecast that growth in the Group of Seven (G7) economies will be slower in the first half of this year compared with the expected 3.7pc annualised growth in the final quarter of 2009.
The Paris-based OECD said the US economy would lead the 2pc growth in the G7 over the first half, with the euro area's three largest economies of Germany, France and Italy growing 0.9pc in the first quarter, accelerating to 1.9pc in the second three months.
Dan McLaughlin, chief economist at Bank of Ireland, said he did not see the European Central Bank raising interest rates for another 12 months.
"The US recovery is far stronger than the euro area recovery at the moment. All of these factors add up to the dollar strengthening against the euro," he said.
OECD chief economist Pier Carlo Padoan said data pointed to a continued recovery of the world economy, but at variable speeds across countries and regions.
Unemployment has probably peaked in the US and euro area, it said, although Germany's economy probably shrank 0.4pc in the first quarter -- the only G7 member to contract.
Even with the recovery under way and profits improving, G7 banks remain vulnerable to credit losses and exposed to interest-rate risks, the OECD said. Yesterday's figures from the European Union's statistics office say gross domestic product in the euro region remained unchanged in the final quarter, revised down from an earlier estimate of 0.1pc growth.
This followed 0.4pc growth in the quarter -- an annualised rate of 1.6pc, on the measure favoured by the US and the OECD.
Exports performed well -- up 1.9pc from the previous three months. Household spending was unchanged and government spending declined 0.1pc.
Dr McLaughlin said the strong performance of Irish exports from the multinational sector showed that the indigenous economy has lost some competitiveness, but that the multinational sector has not.
"The output of the multinational sector went up last year while indigenous production fell by over 14pc.
"Multinational profits also rose last year; which helps to explain why the income of Irish residents (GNP) fell by over 11pc in 2009 -- more precipitously than the 7pc fall in the output of the economy as a whole."