Euro zone growth sticks to lowest rate in four years

January 31, 2019

By Philip Blenkinsop

BRUSSELS (Reuters) – The euro zone economy stuck to its lowest pace of growth in four years in the final three months of 2018, with the rate of expansion in the year as a whole also the slowest since 2014, data showed on Thursday.

Gross domestic product (GDP) in the 19 countries sharing the single currency rose by 0.2 percent in the quarter and by 1.2 percent year-on-year, the European statistics agency Eurostat said in its first estimate.

Both figures matched the average forecasts of economists polled by Reuters.

The quarter-on-quarter rate in the fourth quarter matched that of the third quarter, which had been the lowest rate since the second quarter of 2014. The year-on-year rate of 1.2 percent was a new five year low.

In 2018 as a whole, the euro zone economy expanded by 1.8 percent, down from growth in the past three years of 2 percent or above.

The new data could prompt the European Central Bank to cut its growth forecast of 1.7 percent for 2019, given that the increase in the fourth quarter was only half of what it forecast in December.

The data also followed a slew of weak figures, issued earlier on Thursday, showing the global economy slowing due to headwinds ranging from a Sino-U.S. trade war and uncertainty surrounding Britain’s decision to quit the European Union.

German retail sales fell at their steepest rate since 2007 in December and, in Britain, car production last year suffered the biggest drop since the 2008-9 recession and house prices stagnated in January.

China’s vast manufacturing sector shrank for the second straight month in January and factory output in Japan also fell for a second month in December, underlining a warning by the central bank about growing risks from slowing global growth and the Sino-U.S. trade war.

In the United States, consumer confidence has dropped, wholesale prices weakened, financial markets wobbled and home sales fallen in the six weeks since the U.S. Federal Reserve raised interest rates in response to a “strong” U.S. economy.

In separate data released by Eurostat on Thursday, unemployment in the euro zone, typically a figure that lags the economic cycle, remained at 7.9 percent. It equaled its lowest rate in more than 10 years in December and matched economists’ forecasts.

The jobless rates fell slightly in Italy and Spain, which still have the highest unemployment levels in the euro zone after Greece. In the whole euro zone 75,000 fewer people were out of work than in November.

In the wider 28-country European Union, the jobless rate was 6.6 percent in December, also unchanged from November.

For further details of Eurostat data click on:

(Additional reporting by Balazs Koranyi in Frankfurt, editing by Robin Emmott)