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France and Germany Lead Euro Zone to Higher Growth France and Germany Lead Euro Zone to Higher Growth
(about 1 hour later)
PARIS — France and Germany posted stronger than expected growth Friday for the last three months of 2013, a welcome surprise for the Continent’s economy as it struggles to break free from a long period of lethargy. PARIS — The euro zone grew slightly faster than expected in the last three months of 2013, an official report showed on Friday, bringing welcome news for the global economy amid signs of slowing in the United States and China.
Overall, the economy of the countries sharing the euro zone currency grew more than expected, as well, the European Union’s Statistics Office reported on Friday. The economy of the 17 euro zone countries in the last quarter rose 0.3 percent in the three months to December against the previous three months, after a 0.1 percent rise in the third quarter. Gross domestic product in the 18-nation euro zone grew by 0.3 percent in the October-December period, compared with the previous quarter, when it grew by 0.1 percent, according to Eurostat, the Luxembourg-based statistical agency of the European Union. The quarterly rise was better than the 0.2 percent growth economists had been expecting, and works out to a 1.1 percent annualized rate of growth.
France’s gross domestic product expanded by 0.3 percent in the period from October through December compared with the previous three months, according to data released by Insee, the national statistical agency in Paris. It cited a year-end burst of household spending and business investment for the extra spurt. Germany and France, the two largest euro zone members, led the upturn, the Netherlands broke out of recession, and the pace of growth picked up modestly in Portugal, Spain and Italy. Indeed, the 0.1 percent quarterly growth in Italy marked the first expansion in the country’s economy since the first half of 2011.
Germany’s gross domestic product grew by 0.4 percent from the previous quarter, the Federal Statistics Office reported from Wiesbaden, citing stronger foreign trade. That improved upon the 0.3 percent growth recorded in the July-September period and was better than the 0.3 percent market consensus, and it works out to a roughly 1.6 percent annual rate of growth. Expansion of Europe’s economy continued to lag behind that of the United States, where growth perked up to a quite respectable 3.2 percent annual rate in the fourth quarter.
European stocks were little changed after the report, while the euro ticked up 0.1 percent to $1.3699. But the report issued on Friday came as a welcome surprise at a time when recent data from the United States, including a disappointing retail sales report on Thursday, suggested a slowing might be in the offing, and as China’s economy appeared increasingly fragile amid a push by the authorities in Beijing to deflate what is widely regarded as a giant credit bubble.
The French fourth-quarter figure, which is equivalent to an annual growth rate of roughly 1.2 percent, was slightly better than the 0.2 percent economists had been expecting. Insee also revised the figure for the third quarter to show that the French economy was stagnant during that time, which was an improvement from the previously reported contraction of 0.1 percent. It might also come as at least a small relief to Mario Draghi, the president of the European Central Bank, whose colleagues on the bank’s governing council have been anxiously watching the economic data for signs that ultralow inflation in the euro zone might be tipping the bloc into outright deflation.
“All in all, despite only slightly positive numbers, we think this is a strong reading for the French economy,” economists at Barclays wrote in a research note. With past revisions having pushed up G.D.P. in all quarters, they wrote, “this strongly contradicts the view of France decoupling and contracting.” Mr. Draghi said last week that he wanted to see additional data, including the G.D.P. report, before making any further adjustments to monetary policy.
For the 28-nation European Union as a whole, the economy grew by 0.4 percent from the previous quarter, a 1.6 percent annualized growth rate. For all of 2013, the euro zone economy shrank 0.4 by percent, while the overall Union economy contracted by 0.1 percent.
Financial markets met the news calmly, with the broad Stoxx Europe 600 index adding 0.4 percent and the euro ticking up 0.1 percent against the dollar to $1.3696.
As welcome as the growth report might be, it means little to the more than 26 million people that Eurostat estimates are without jobs across Europe, and the pace of growth is insufficient to turn the labor market around.
Growth “is likely to remain a long way short of the rates needed to tackle the problems of sky-high unemployment and crippling debt levels in many euro zone countries,” wrote Jonathan Loynes, an economist in London with Capital Economics, in a research note. “And with G.D.P. still almost 3 percent below its 2008 peak, the dangers of deflation in the currency union will persist.”
The “modest expansion” does not, he added, reduce “the urgent need for more policy action from the European Central Bank.”
Germany’s gross domestic product grew by 0.4 percent from the previous quarter, the Federal Statistics Office reported from Wiesbaden, citing stronger foreign trade as an impetus. That was better than the 0.3 percent growth recorded in the July-September period, and better than the 0.3 percent analysts were expecting. It works out to a roughly 1.6 percent annual rate.
France’s gross domestic product expanded by 0.3 percent in the October-December period compared with the previous three months, Insee, the national statistical agency, reported from Paris. It cited a year-end burst of household spending and business investment for the extra spurt that finally pushed France’s economy back above the precrisis level of early 2008.
“This is obviously not enough,” Pierre Moscovici, the French finance minister, told France 2 television, “but it well shows the strength of our economy.”
The pace of contraction in Cyprus slowed to 1.0 percent from 1.1 percent in the previous quarter. Among euro zone nations, Finland, where G.D.P. shrank 0.8 percent after shrinking 0.2 percent in the prior quarter, was the only country in which conditions worsened appreciably.
Even with the modestly good news, Europe continues to operate far below its capacity, with an output gap — the gulf between actual output and potential output — of as much as 3.8 percent, according to the Organization for Economic Cooperation and Development. That means weak demand has left the economy with plenty of slack.
That is troubling to the E.C.B., because consumer prices are already ticking dangerously close to outright deflation, a condition that could leave the bloc with the same kind of malaise that has bedeviled Japan for much of the past two decades. A big output gap could exacerbate the problem because there is no upward pressure on prices generated by demand.
One place that slack is apparent is in the labor market, with the euro zone jobless rate at 12 percent.
That painfully high figure disguises a vast disparity in conditions between member states. Greece, in the middle of what can only be called a depression, said on Thursday that its jobless rate in November stood at a record 28 percent, and Spain is not much better off, at 25.8 percent. That contrasts sharply with rates of 5.1 percent in Germany and 7 percent in the Netherlands.
Some economists and leaders would like to see a concerted fiscal stimulus to help restore the missing demand. But politics in the European Union — and Germany — being what they are, the only policy around which the bloc has been able to rally has been fiscal austerity.