Eurozone economy flatlines in fourth quarter

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The eurozone economy was stagnant in the final three months of last year, held back by shrinking German output and stalled French growth that offset a stronger than expected rebound in Spain and Italy.

The flat performance of the 20 economies that share the euro was better than the 0.1 per cent contraction forecast by economists in a Reuters poll. It followed a 0.1 per cent decline in the previous quarter and meant the eurozone grew 0.5 per cent last year, the EU’s statistics office said on Tuesday.

That left the bloc trailing the US, which last week established itself as the world’s fastest-growing advanced economy in 2023 with annual growth of 3.1 per cent. China’s government recently estimated its economy grew 5.2 per cent last year.

“Europe is still recovering from a lingering energy shock and has not experienced the same degree of fiscal stimulus as the more resilient US economy in recent years,” said Nicola Mai, a sovereign credit analyst at investor Pimco.

The main drag on eurozone growth was the German economy, which shrank 0.3 per cent in the period, dragged down by falling investment in construction, machinery and equipment, the country’s statistical agency said on Tuesday, confirming an initial estimate earlier this month.

The stalling of French gross domestic product in the fourth quarter followed a similar outcome in the third quarter, which was revised up on Tuesday from an earlier estimate of a 0.1 per cent contraction by Insee, the French statistics agency.

Italy’s economy, in contrast, provided a boost after it expanded 0.2 per cent in the period thanks to stronger output in industry and services that offset weaker domestic demand. That was up from 0.1 per cent growth in the previous quarter and was stronger than the stagnation forecast in a Reuters poll.

The Spanish economy also accelerated faster than expected by…