Business World

Friday 19 January 2018

Eurozone economy accelerates thanks to German thunderbolt

There was welcome news in the Eurozone as Germany expanded at twice the expected rate, while our exports rose by 2pc last year
There was welcome news in the Eurozone as Germany expanded at twice the expected rate, while our exports rose by 2pc last year

Philip Blenkinsop

Economic growth in the Eurozone accelerated unexpectedly in the final three months of last year 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 expanded by 0.3pc between October and December compared to the previous three months, Eurostat, the EU's statistical agency, said.

Year-on-year, growth in the Eurozone was 0.9pc in the fourth quarter, also 0.1 percentage points higher than expected.

The bloc's biggest economy, Germany, was a clear outperformer, growing by 0.7pc in the quarter, far surpassing expectations of a 0.3pc 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 1.6pc.

Domestic demand lifted Germany out of its mid-year lull and allowed it to achieve 2014 growth of 1.6pc.

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. "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 0.1pc, meaning the Eurozone's second largest economy advanced by just 0.4pc across the whole of 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 0.4pc, 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 more than €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 0.3pc.

Greece's economy contracted by 0.2pc in the final three months of last year after three consecutive quarters of growth.

That marked a 1.7pc increase from the same period a year earlier, but was below the 2.2pc forecast.

The twice-bailed-out country's economy had been expected to show it has put a long and savage recession behind it.

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business