Stronger than expected Germany and France nudge up euro zone growth

Friday 14 February 2014 18.23
Euro zone economy grew 0.3% in the fourth quarter of 2013
Euro zone economy grew 0.3% in the fourth quarter of 2013

Slightly stronger than expected growth in Germany and France pushed the euro zone's recovery up a gear in the fourth quarter and offered potential for a more robust 2014, albeit with risks.

Data today showed the euro zone economy rose by 0.3% in the three months to December compared with the previous quarter.

This slightly exceeded market expectations for a 0.2% expansion. 

The €9.5 trillion economy had already emerged in the second quarter from its longest recession since the introduction of the single currency.

But record high unemployment, external economic risks, fiscal austerity and low inflation have kept a lid on the rebound.

The EU's statistics office will publish a detailed breakdown on March 5, but analysts said the fourth-quarter growth was mainly driven by exports and investment.

A positive signal was that for the first time in almost three years all of the six largest euro zone economies recorded quarterly expansions.

Germany, the European's largest economy, saw its growth accelerating to 0.4% on the quarter thanks to a rise in exports and capital investment, up from 0.3% in the previous three months.

The French economy expanded by 0.3% and statistics office INSEE revised up the third quarter figure to flat from -0.1%. That meant France grew 0.3% over the course of last year, more than the government's estimate of 0.1%.

Italy, now awaiting a new prime minister with Enrico Letta resigning today having been forced out by his own Democratic Party, dragged itself back to growth for the first time since mid-2011. Its economy expanded marginally by 0.1%. Over the whole of 2013, GDP contracted by 1.9%, the ISTAT statistics office said.

Italy has been one of the world's most sluggish economies for more than a decade. Growth has averaged less than zero over the last 12 years. In 2014, the government forecasts growth of 1.1%.

The European Central Bank kept policy steady earlier this month with President Mario Draghi declaring more information was needed before deciding on any action. He cited fresh ECB staff forecasts which will be ready for the March policy meeting and the fourth quarter GDP numbers.

Spain has already reported fourth quarter growth of 0.3%, its second successive quarter of expansion. The government now expects growth this year of close to 1%, compared with an official forecast of 0.7%. 

The Dutch economy grew by a solid 0.7% on the quarter, well above the market consensus. Austrian GDP rose 0.3%.