Germany, France help push Euro zone growth to 0.3pc in fourth quarter

Capital investment and exports drive slightly stronger than expected fourth quarter growth

PUBLISHED : Saturday, 15 February, 2014, 1:47am
UPDATED : Saturday, 15 February, 2014, 1:47am

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 released yesterday showed the euro zone economy grew by 0.3 per cent in the three months to December compared with the previous quarter. That slightly exceeded market expectations for a 0.2 per cent expansion.

The €9.5 trillion (HK$99.6 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 European Union'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 expansion.

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

The French economy expanded by 0.3 per cent.

Analysts nonetheless were cautious.

"It is still going to be far from plain sailing for the euro zone in 2014 as a number of significant growth constraints remain," said Howard Archer, chief European economist at IHS.

Martin van Vliet, an analyst with ING, said a sustained recovery was "not yet assured".

The European Central Bank kept policy steady earlier this month, with bank president Mario Draghi declaring more information was needed before deciding on any action.

Analysts say growth now needs to spill over into a decent job creation, a crucial link missing from the recovery so far.

"Moreover, both the relatively strong euro and the slowdown in emerging market economies are clear downward risks to the growth outlook," van Vliet said.