Eurozone: Eurozone economy shows decent growth in Q4
February 12, 2016
The Eurozone economy continued to grow in the final quarter of 2015 and maintained the pace observed in the previous quarter. A preliminary estimate showed that the Eurozone GDP increased a seasonally-adjusted 0.3% in Q4 over the previous quarter, which was in line with Q3’s growth rate and market expectations. Compared with the same quarter of 2014, GDP expanded 1.5% in Q4, which was a touch slower than the 1.6% rise observed in Q3. Based on quarterly data, the Eurozone economy increased 1.5% in the full year 2015, which marked the strongest expansion since 2011.
Although the preliminary GDP data did not include a breakdown by components, additional data continued to show that growth was supported by domestic demand, in particular by private consumption. Household consumption continues to be supported by low inflation, a gradual improvement in the labor market and an expansionary monetary policy, which is currently fueling credit growth.
Meanwhile, additional data released by statistical offices across the continent showed that Germany’s economic growth in the fourth quarter maintained the momentum observed in the previous quarter, while the economies of France and Italy eked out meagre growth in Q4. Meanwhile, Spain was again a top performer, expanding a solid 0.8% quarter-on-quarter in Q4, whereas crisis-struggling Greece showed another disappointing contraction (Q4: -0.6% quarter-on-quarter) and thus entered into technical recession. Surprising on the downside was Finland, whose economy also entered into technical recession in Q4 as GDP recorded a second consecutive contraction.
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 coming quarter. Nonetheless, sluggish external demand, particularly coming from emerging economies as well as some weakness in key European industries, are posting risks to the downside. Teunis Brosens, Senior Economist commented:
“Q4 GDP growth confirms that while the Eurozone recovery progressed, it remained stuck in second gear. Weak industrial production shows that the Eurozone is not immune to weakness in emerging markets, let alone to a wavering U.S. economy. Then again, new order intake does not look all that bad: new orders, while volatile, are still trending upwards, both from within and outside the Eurozone. In sum, while certainly not all is great in the Eurozone, the state of the economy does not warrant the jittery markets we are witnessing this week.”
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