Growth spurt for euro area

The eurozone economy picked up momentum at the end of last year, with Germany reasserting itself as the driver of growth, offsetting weakness in Greece and Italy.

Gross domestic product rose 0.3% in the fourth quarter after expanding 0.2% in the previous three months, the EU’s statistics office in Luxembourg said yesterday.

Analysts surveyed by Bloomberg News predicted growth of 0.2%. The Greek economy unexpectedly shrank 0.2%. 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, ECB president Mario Draghi announced a €1.1tn 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 in Milan.

“The euro area is supported by the very strong tailwinds of the fall of the euro, the fall of oil prices and the fall of interest rates sparked by ECB quantitative easing,” she said.

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

The Greek economy shrank after three quarters of growth, and Italy’s stagnated after two consecutive quarters of contraction. Growth in Portugal and the Netherlands was 0.5%, more than analysts anticipated. Spain, the euro area’s fourth-largest economy, reported on January 30 that its economy expanded at the fastest pace in seven years in the fourth quarter, with GDP rising 0.7%.

In the euro area, “the bulk of fourth-quarter GDP growth is likely due to domestic demand, with private consumption growing considerably again,” said Evelyn Herrmann, an economist at BNP Paribas in London.

The European Commission raised its euro-area growth forecasts on February 5 while lowering the inflation outlook, citing the lower cost of crude oil and a weaker euro.

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