Hopes of a UK export recovery were buoyed after Germany and France fired the euro zone a third successive quarter of growth.
GDP across the single currency bloc increased by 0.3 per cent in the three months to December, accelerating from the previous quarter’s 0.1 per cent growth and beating analysts’ expectations of an 0.2 per cent expansion.
A pick-up in Europe, the destination of around half of the UK’s exports, bolstered hopes that Britain’s recovery, which has so far relied on household spending, will start to rebalance.
Over 2013 as a whole the eurozone, which emerged from an 18-month double-dip recession last April, contracted by 0.4 per cent. The European Commission is forecasting growth for the bloc of 1.1 per cent in 2014, still considerably below the 2.7 per cent consensus for UK growth this year.
German GDP expanded by 0.4 per cent in the final three months of last year, while growth in France came in at 0.3 per cent, both exceeding analysts’ expectations.
Francois Hollande’s government was also boosted by news that France flatlined in the third quarter, rather than contracting by 0.1 per cent as previously reported.
Italy eked out 0.1 per cent growth, its first expansion since the third quarter of 2011.
The Netherlands expanded by 0.7 per cent, up sharply from 0.3 per cent growth in the previous quarter. Portugal’s recovery also picked up, by 0.5 per cent, following 0.3 per cent growth in the third quarter.
The European Central Bank kept interest rates on hold this month, despite inflation in the eurozone dipping to just 0.7 per cent, well below its 2 per cent target.
The ECB’s president Mario Draghi, pictured, said he saw low inflation for an “extended period”, but added he would be prepared to take “decisive action if required” to support growth in the currency bloc.
“Today’s better-than-expected GDP data does provide the ECB with a little more confidence about the recovery and hence reduce the chances of a March rate cut,” said Martin van Vliet of ING.
The main contributor to Germany’s expansion was exports. But in France growth was boosted by a mix of exports, consumption and investment. Household spending was up 0.5 per cent, while investment expanded by 0.6 per cent.
Exports put on 1.2 per cent, following a 1.6 per cent drop in the previous quarter. French finance minister, Pierre Moscovici, said the figures showed France was “back on a growth path”, although he stressed reform was still necessary to bring down its 10.8 per cent unemployment rate.