Euro zone economy jumps 0.3% on back of German spurt

Euro zone gross domestic product (GDP) grew by more than expected in the final three months of 2014, data from the European statistics agency Eurostat showed on Friday, as the German economy accelerated.

A preliminary estimate by the European Union’s statistics office Eurostat showed that the economy of the 18 countries sharing the euro expanded 0.3 per cent quarter-on-quarter in the October-December period after a 0.2 per cent rise in the previous three months.

Year-on-year, euro zone growth was 0.9 per cent in the fourth quarter, from 0.8 per cent in the third quarter, again higher than the expectation of a 0.8 per cent rise.

While the currency bloc’s economy is overcoming its longest-ever slump, falling consumer prices and the rise to power of an anti-austerity party in Greece have increased the risks to growth. To avert deflation in a region where consumer spending is bolstering the recovery, European Central Bank president Mario Draghi announced a €1.1 trillion quantitative-easing package that has already pushed down bond yields and the single currency.

“For the first time in two years, we can say that the region is going for solid growth,” said Anna Maria Grimaldi, an economist at Intesa Sanpaolo SpA in Milan.

“The euro area is supported by the very strong tailwinds of the fall of the euro, the fall of oil price and the fall of interest rates sparked by ECB QE.”

The German economy, the region’s largest, expanded 0.7 per cent in the fourth quarter, more than twice as much as forecast, while the French slowed in line with economists projections.

The Greek economy shrank after three quarters of growth, while Italy’s stagnated after two consecutive quarters of contraction. Spain, the euro-area fourth-largest economy, reported last month that its economy expanded at the fastest pace in seven years in the fourth quarter, with GDP rising 0.7 per cent. The European Commission raised its euro-area growth forecasts earlier this month while lowering the inflation outlook, citing the lower cost of crude oil and a weaker euro.

It sees expansion of 1.3 per cent in 2015 and 1.9 per cent next year, while consumer prices will fall 0.1 per cent this year before rising 1.3 per cent in 2016.

Reuters/ Bloomerg