Euro zone growth rate beats forecasts as outlook improves

Rising exports and gradual improvement in investment lifts GDP growth to 0.3%

Euro currency notes and coins sit in a cash register inside a Mercator Poslovni Sistem supermarket in Ljubljana, Slovenia. Photograph: Chris Ratcliffe/Bloomberg

Euro currency notes and coins sit in a cash register inside a Mercator Poslovni Sistem supermarket in Ljubljana, Slovenia. Photograph: Chris Ratcliffe/Bloomberg

Wed, Mar 5, 2014, 10:46

Rising exports and a gradual improvement in investments were behind the euro zone’s stronger-than-expected growth in the last quarter of 2013, data showed today.

The $9.5 trillion economy rose by 0.3 per cent in the October-to-December period, a figure that compared to 0.1 per cent growth in the previous three months, the European Union’s statistics office Eurostat said.

The fourth-quarter expansion came on the back of a 1.2 per cent rise in exports in the period and a 1.1 per cent rise in investments.

The improving economic outlook provides some breathing space for the European Central Bank before tomorrow’s policy meeting.

The ECB is expected to show how it wants to fight disinflation pressures that could threaten the recovery. Compared with the same period last year, the euro zone’s economy rose 0.5 per cent in the fourth quarter, returning to annual growth for the first time in two years.

Europe’s biggest economy Germany showed a robust 0.4 per cent expansion in the fourth quarter, when compared with the previous three months, and growth of the second largest economy France accelerated to 0.3 percent after being flat in third quarter.

The European Commission said last month it expects Germany to accelerate away from France and Italy in 2014 as the euro zone economy gradually recovers from its worst crisis. In a departure from the gloom of recent years, Brussels slightly increased its growth prediction for the bloc’s economy to 1.2 per cent this year from an earlier 1.1 per cent.

A separate data release today showed a much stronger rebound in retail sales in January. The euro zone’s volume of retail sales jumped 1.6 per cent on the month after a revised 1.3 per cent drop in December.

Compared with the same period of the last year, there was a 1.3 per cent growth in January, following a revised 0.4 per cent drop in December.

Analysts polled by Reuters expected a 0.8 per cent rise on the month. Germany saw a 2.5 per cent monthly jump in January and France booked a 1.2 per cent rise.

Despite a gradual pick-up in growth, household demand across the euro zone remains weak as the bloc suffers from near record unemployment, notably among young Europeans, keeping a lid on Europeans’ spending.

But in a sign of the improving situation in southern Europe, Portugal witnessed a 6.7 per cent rise in volume of retail sales in January, when compared with December.

Reuters