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The euro zone economy stagnated in the final three months of last year, held back by output cuts in Germany and stalled growth in France, offset by stronger-than-expected recoveries in Spain and Italy.
Economic trends in the 20 countries that share the euro were flat, beating the 0.1% contraction expected by economists polled by Reuters. The EU statistics office said on Tuesday that this means the eurozone grew by 0.5% last year, following a 0.1% decline in the previous quarter.
This puts the region behind the United States, which last week established itself as the world's fastest-growing developed economy in 2023 with an annual growth rate of 2.5%. The Chinese government recently estimated last year's economic growth rate at 5.2%.
“Europe is still recovering from a prolonged energy shock and has not experienced the same degree of fiscal stimulus as the more resilient U.S. economy in recent years,” said Nicola Mai, sovereign credit analyst at investment firm Pimco. Ta.
The main drag on euro zone growth was the German economy, which shrank by 0.3% in the same period due to lower investment in construction, machinery and equipment, the country's statistics office said on Tuesday, compared to earlier this month. Confirmed my prediction.
France's gross domestic product (GDP) stalled in the fourth quarter, following a similar result in the third, and was revised upward on Tuesday from France's statistics agency Insee's earlier forecast for a 0.1% contraction.
In contrast, Italy's economy grew by 0.2% over the same period, boosted by increased industrial and services production that offset weak domestic demand. That was up from 0.1% growth in the previous quarter and was stronger than a Reuters poll had predicted for stagnation.
Spain's economy also accelerated faster than economists expected, with stronger domestic demand leading to quarterly growth of 0.6%, the biggest expansion this year.
Spain's Statistics Authority also said inflation rose unexpectedly from 3.3% in December to 3.5% in January due to higher electricity prices reflecting the phasing out of tax cuts. Economists had expected the rate to slow to 3.1%.
Investors will be watching to see whether inflation across the region falls as expected to 2.8% in January, when price data is released on Thursday, from 2.9% the previous month. This figure is a key indicator of how close the European Central Bank is to cutting interest rates.
Spain's economy grew by 2.5% last year, France by 0.9% and Italy by 0.7%, according to figures released on Tuesday. However, the German economy shrank by 0.3% over the year.
“Details in the reports for France and Spain, as well as Italy and Germany, suggest that domestic demand has been a drag on growth, while net trade has been a boost,” said Melanie Debono, an economist at consultancy Pantheon Macroeconomics. “I am doing so,” he said.
Economists expect the euro zone economy to pick up slightly this year as falling inflation and continued wage increases give consumers more purchasing power. A strong labor market should also support demand, with the unemployment rate hitting a record low of 6.4% in November.
However, governments have withdrawn many of the energy and food subsidies introduced to cushion the impact of rising living costs following Russia's full-scale invasion of Ukraine, which could weigh on the rebound.
Last week, the European Commission announced that consumer confidence in the euro area had fallen by one point to minus 16.1, further below the long-term average.
A survey of purchasing managers released last week by S&P Global found that companies in the euro area were still struggling with weak demand at the start of the year, with the slowest pace in January Activity was found to continue to decline.
“The expected lower inflation rate should translate into more fiscal support for households, but this positive impact should be at least partially offset by less supportive fiscal conditions,” said S&P Global economist Diego Iscaro. Deaf,” he said.
This article has been republished to revise 2023 growth rates for the United States.
