Eurozone recovery strengthening, data suggests
(BRUSSELS) - The eurozone's economic recovery is strengthening, data released Wednesday suggested, although growth remains moderate with hard-pressed consumers keeping a tight check on spending.
Gross domestic product growth accelerated to 0.3 percent in the fourth quarter of 2013 in the eurozone, enough of an improvement on 0.1 percent in the previous quarter, the EU's data agency said.
The eurozone had escaped a record 18-month recession in the second quarter last year with growth of 0.3 percent, but then stagnated.
In its final figures for October to December growth, Eurostat confirmed that investments and exports drove recovery in the final quarter.
However, household spending rose by just 0.1 percent, the same rate as in the third quarter.
"The consumer revival required to broaden and strengthen the economic recovery (was) still conspicuous by its absence," said Jonathan Loynes, chief European economist at Capital Economics.
Retail sales figures released separately showed a 1.6 monthly gain in January, but Loynes noted this followed a drop of roughly the same amount in December.
Slovenia posted the strongest growth at 1.2 percent while Cyprus registered a slide of 0.1 percent along with Estonia while Finland saw a fall of 0.3 percent.
The bloc's biggest economy Germany showed growth of 0.4 percent in the October-December period, better than analyst forecasts for 0.3 percent, while the French economy grew 0.3 percent, below forecasts.
Italy managed only 0.1 percent growth.
- PMI hits 32-month high -
However a key forward-looking indicator, a survey of companies compiled by data firm Markit, showed that business activity in the 18-nation eurozone powered to its strongest growth in over two-and-a-half years.
Markit Economics said its Eurozone Composite Purchasing Managers Index (PMI) for February rose to 53.3, the highest level since June 2011.
A figure above 50 suggests an upturn while one below shows a decline.
"The final PMI indicates that the eurozone economy grew at the fastest rate since June 2011," said Chris Williamson, chief economist at Markit.
"The survey suggests the region is on course to grow by 0.4-0.5 percent in the first quarter, which would be its best performance for three years."
The upturn in the service sector gave the main boost to overall activity, while manufacturing also contributed.
Ireland posted the steepest expansion of business activity, while Germany was second placed.
Italy also returned to growth and recovery continued in Spain, the survey showed.
"Perhaps the best news came from Spain, which is enjoying its best quarter of growth for seven years, and Italy where the rate of growth hit a near three-year high," said Williamson.
France, however, remained the eurozone's laggard, being the only nation to report a contraction in business activity for the month.
Christian Schulz, Senior Economist at Berenberg Bank, pointed to the increase in the services component of the PMI, which rose to 52.6 from 51.6, while manufacturing dipped to 53.2 from 54.0 as indicating a recovery in household spending is under way.
"The export-led Eurozone recovery is broadening out to domestic demand despite the legacy of the crisis," said Schulz.
But even a 0.4-0.5 percent expansion in the first quarter is "not the sort of growth that is needed to absorb the large amount of spare capacity in the economy and hence head off the dangers of deflation," said Loynes.
The analyst believes that the ECB will Thursday seek to stimulate growth by making a small cut to is key refinancing rate, which is at a record low 0.25 percent.
Such a tepid growth rate is also not sufficient to bring the eurozone unemployment down from near record levels. The unemployment rate was 12 percent in January, with nearly 19.2 million people out of work.