Euro zone growth less than expected

Europe's economy expanded less than economists forecast in the fourth quarter as cold weather curbed German output and French growth unexpectedly stalled.

Gross domestic product (GDP) in the euro region rose 0.3 per cent from the previous three months, when it increased at the same rate, the European Union's statistics office in Luxembourg said today.

Exports fell 0.4 per cent in December from the previous month, a separate report showed today.

Companies have relied on faster-growing markets to boost sales as governments from Spain to Greece toughened budget cuts, undermining consumer demand. Bayerische Motoren Werke AG, the world's largest luxury-car maker, this month forecast a "significant" sales increase in the first half and German investor confidence rose for a fourth month in February, suggesting the recovery is gathering strength.

The euro was little changed against the dollar after the data, trading at $1.3530 at 11:26 am in Frankfurt, up 0.3 per cent on the day.

German GDP rose 0.4 per cent in the fourth quarter from the previous three months, when it increased 0.7 per cent, as unusually cold temperatures hurt construction output. France's economy maintained its pace, growing 0.3 per cent. In Italy, GDP rose 0.1 per cent while Finland's economy grew 2.5 per cent.

In Greece and Portugal, the economies contracted from the previous three months, today's report showed. The statistics office didn't provide figures for Ireland.

Reviving exports have boosted the region's expansion as budget cuts and the highest unemployment in more than 12 years prompted consumers to cut spending.

The trade report showed that shipments to the US rose 18 per cent in the 11 months through November from a year earlier. Exports to the UK, the region's largest market, increased 12 per cent, while sales to China and Russia surged 38 per cent and 29 per cent, respectively. Detailed data are published with a one-month lag.

The seasonally adjusted trade deficit was €2.3 billion in December, down from €3.2 billion.

From a year earlier, euro zone GDP rose 2 per cent, up from 1.9 per cent in the previous quarter, today's report showed. The statistics office will publish a detailed breakdown of the data on March 3rd. Estonia joined the euro region this year, making it 17 countries sharing the currency.

Adding to signs the recovery is gathering strength, German business confidence surged to a record last month and unemployment dropped to the lowest in almost two decades. European economic sentiment held near the highest in more than three years, while the services and manufacturing industries expanded at a faster pace in January.

Bloomberg