Rising exports and a gradual improvement in investments were behind the euro zone's stronger than expected growth in the last quarter of 2013, data showed today.

The €9.5 trillion economy rose by 0.3% in the three months from October to December, a figure that compared to 0.1% growth in the previous three months, the European Union's statistics office Eurostat said.

The fourth-quarter expansion came on the back of a 1.2% rise in exports in the quarter and a 1.1% rise in investments.

The improving economic outlook provides some breathing space for the European Central Bank before tomorrow's policy meeting.

The ECB is expected to show how it wants to fight disinflation pressures that could threaten the recovery.

Compared with the same time the previous year, the euro zone's economy rose 0.5% in the fourth quarter, returning to annual growth for the first time in two years.

Europe's biggest economy Germany showed a robust 0.4% expansion in the fourth quarter, when compared with the previous three months, and growth of the second largest economy France accelerated to 0.3% after being flat in third quarter.

The European Commission said last month it expects Germany to accelerate away from France and Italy in 2014 as the euro zone economy gradually recovers from its worst crisis.

In a departure from the gloom of recent years, Brussels slightly increased its growth prediction for the bloc's economy to 1.2% this year from an earlier 1.1%.

Strong euro zone retail sales

A separate data release today showed a much stronger rebound in retail sales in January. The euro zone's volume of retail sales jumped 1.6% on the month after a revised 1.3% drop in December.

Compared with the same time of the last year, there was a 1.3% growth in January, after a revised 0.4% drop in December.

Analysts polled by Reuters expected a 0.8% rise on the month.
Germany saw a 2.5% monthly jump in January and France booked a 1.2% rise.

Despite a gradual pick-up in growth, household demand across the euro zone remains weak as it suffers from near record unemployment, notably among young Europeans, keeping a lid on Europeans' spending.

But in a sign of the improving situation in southern Europe, Portugal witnessed a 6.7% rise in volume of retail sales in January, when compared with December.