February 12, 2010 / 10:07 AM / 9 years ago

Euro zone recovery falters in fourth quarter of '09

* Euro zone GDP up 0.1 pct q/q, down 2.1 pct yr/yr

* Dec industrial production -1.7 pct m/m, -5.0 y/y

* Consumer spending tight as unemployment grows

By Marcin Grajewski

BRUSSELS, Feb 12 (Reuters) - Euro zone economic recovery stumbled in last year’s final quarter as gross domestic product barely expanded, dragged down by a poor German performance despite healthy figures from France, data showed on Friday.

The 16-country currency area’s GDP edged up 0.1 percent in the October-December period, compared with the previous quarter, and contracted by 2.1 percent from the last quarter of 2008, statistical office Eurostat said in a flash estimate. [ID:nBRQ009717]

Analysts polled by Reuters had expected quarterly growth of 0.3 percent and a year-on-year decline of 1.9 percent.

Over the whole year 2009, euro zone GDP fell 4.0 percent, in line with the European Commission’s expectations.

The euro zone figure was dragged down by Germany, the area’s biggest economy, which stagnated in the final three months of 2009 quarter-on-quarter.

In France, the zone’s second-biggest economy, GDP grew by 0.6 percent, more than expected, driven by robust consumer spending.

By comparison, the United States economy grew by 1.4 percent quarter-on-quarter in the same period and by 0.1 percent in yearly terms.

In the third quarter, the euro zone economy expanded by 0.4 percent quarter-on-quarter.

An uncertain growth outlook is expected to keep the European Central Bank’s main interest rate at a record low of 1.0 percent until the fourth quarter of 2010, economists say.

But the bank has already started to pull back the emergency lending measures introduced during the financial crisis.

Analysts say any recovery from the biggest crisis since World War Two is likely to be limited, because growing unemployment is forcing people to keep their spending tight.

The euro zone’s jobless rate rose to 10 percent of the workforce in December, the highest rate since August 1998.


GDP growth will therefore depend on government spending as tens of billions of euros are pumped into the economy to stimulate demand, and on companies replenishing their inventories.

However, deteriorating public finances will sooner or later force many countries to tighten their fiscal policies as tensions continue in the euro zone due to financial problems in Greece and some other countries.

Industrial production figures compounded the gloomy picture.

Eurostat said euro zone production tumbled 1.7 percent in December from the previous month, defying expectations of growth, and declined 5.0 percent annually. [ID:nBRQ009716]

It was the biggest monthly decline in industrial production since February 2009, when the index nose-dived 3.8 percent.

Analysts had expected monthly production to increase by 0.2 percent in December and fall 1.5 percent year-on-year.

However, Eurostat revised up the November production figures to +1.4 percent month-on-month and -6.9 percent annually from previous readings of +1.0 percent and -7.1 percent respectively. (Editing by Dale Hudson)

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