Eurozone: Economic growth in the Eurozone maintains momentum due to investment
March 8, 2016
In the final quarter of 2015, economic activity in the Eurozone maintained the pace of growth observed in third quarter. According to more complete data, GDP increased a seasonally-adjusted 0.3% in Q4 over the previous quarter, which was in line with the 0.3% expansion observed in Q3 and market expectations. On an annual basis, GDP also maintained the pace at Q3’s 1.6% in Q4 (previously reported: +1.5% year-on-year) and brought overall economic growth to 1.5% for 2015.
Economic growth in Q4 principally was maintained by a strong expansion in gross fixed investment, which compensated for a deceleration in private consumption. Gross fixed investment accelerated progressively since Q2 2015 and expanded 1.3% in Q4 (Q3: +0.4% quarter-on-quarter). In addition, government consumption increased 0.6% in Q4, which came in above the 0.3% rise tallied in Q3. Conversely, private consumption decelerated from a 0.5% increase in Q3 to a 0.2% expansion in Q4.
On the external front, exports of goods and services rose 0.2% in the fourth quarter and matched the 0.2% increase registered in Q3. On the other side of the balance, imports slowed from a 1.2% increase in Q3 to a 0.9% expansion in Q4. Consequently, net exports subtracted 0.3 percentage points from overall economic growth in Q4, which followed the 0.4 percentage-point drag registered in Q3.
Overall, the recovery in the Eurozone economy continued at a modest cruising speed in the final quarter of 2015 and is expected to continue in the first quarter of 2016. Nonetheless, sluggish external demand, particularly coming from emerging economies as well as some weakness in key European industries, are posting risks to the downside.
In December, the European Central Bank stated that it projects that the Eurozone economy will expand 1.7% in 2016. For 2017, the Bank expects the economy to increase 1.9%.
Author: Ricardo Aceves, Senior Economist