Eurozone Economy Stagnates In Q4

(RTTNews) - The euro area economic growth ground to a halt in the fourth quarter as output shrunk in Germany and France and remained flat in Italy, leaving Spain as the only economy in the big four to continue expansion, adding hopes of another interest rate cut by the European Central Bank later on Thursday.

Gross domestic product showed a flat growth in the fourth quarter, following an expansion of 0.4 percent in the third quarter, preliminary flash estimate published by Eurostat showed Thursday. On a yearly basis, economic growth held steady at 0.9 percent, while economists expected the growth to improve to 1.0 percent. The next estimates for the fourth quarter will be released on February 14.

The largest euro area economy logged an unexpected contraction in the fourth quarter on weaker exports. German GDP fell 0.2 percent from a quarter ago, following a 0.1 percent sequential growth in the third quarter.

The French economy contracted for the first time in nearly two years in the fourth quarter as the positive impact of the Paris Olympics and Paralympic Games faded. GDP shrank 0.1 percent after expanding 0.4 percent in the third quarter.

Italy's GDP remained flat for the second straight time in the fourth quarter. Meanwhile, Spain registered an expansion of 0.8 percent, the same as in the third quarter.

ING economist said Bert Colijn said the economy seems to be in a slump and it is not expected to come out this winter. The first indications for the first quarter are that the economy will hover around stagnation some more, he noted.

Over the course of this year, domestic demand is likely to drive some economic growth again, Colijn added.

Official data today showed that the overall unemployment rate in the euro area edged up in December, while the youth unemployment rate decreased marginally. The unemployment rate rose to 6.3 percent in December, as expected, from 6.2 percent in November.

The number of unemployed increased 96,000 from November. From last year, unemployment fell 266,000.

The youth unemployment rate in the currency bloc dropped marginally to 14.8 percent from 14.9 percent in the prior month.

Elsewhere, survey results from the European Commission showed that euro area economic sentiment improved more than expected in January. Employment expectations also rebounded at the start of the year.

The economic sentiment index rose to 95.2 from 93.7 in December. The score was forecast to rise to 94.1.

The upturn in the ESI was driven by increased confidence in industry, construction and services, while confidence in retail trade declined.

Driven by managers' brighter production expectations, the industrial confidence index came in at -12.9 compared to -14.1 in December. The score was also better than forecast of -13.8.

Likewise, the construction sentiment index improved to -3 from -3.8 and the services confidence climbed to 6.9.

The final consumer sentiment index registered -14.2 in January, up from -14.5 in the previous month. The reading matched the flash estimate.

However, confidence among retailers weakened in January, with the index falling to -5.0 from -4.5.