Eurozone will post a decline in fourth-quarter GDP

Daniel Fowler
February 4, 2021

That compares with quarter-on-quarter GDP growth of 1 per cent in the United States and 2.6 per cent in China in the final three months of 2020.

Though catastrophic, this was much better than the European Union commission's forecast of a 7.8 percent crash, made in November. However, the drop was in both cases one point lower than that forecast last November by the European Commission, which predicted a contraction of GDP of 7.4% in the EU and 7.8% in the euro area.

Analysts expected a 1.0% quarterly fall and a 5.4% annual contraction after a sharp rebound in the third quarter period when the euro zone eased restrictions on travel.

"The eurozone economy got away with a black eye late past year", said Florian Hense, economist at Berenberg.

The Eurostat agency said inflation in the 19 countries that use the euro hit 0.9 per cent at the start of 2021, a big leap from the negative 0.3 per cent rate a month earlier.

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The stuttering pace of the recovery and the slow progress of vaccination schemes have prompted many economists to warn that the eurozone faces a double-dip recession this winter, given the risk of another contraction in the first quarter.

"This has had a very positive effect on GDP, especially because demand for goods and construction has remained strong despite lockdowns in place", said Bert Colijn, economist at ING. But since October, the renewed spread of the coronavirus prompted governments to restrict economic activities once again.

European economy suffered the sharpest quarterly slowdown on record in the second quarter past year due to the pandemic, followed by a two-digit strong rebound in the third quarter. Only Austria's decline of 4.3 per cent was worse, while Spain and Germany both eked out slight growth.

The European Union's statistics office Eurostat said that according to its preliminary flash estimate, gross domestic product in the 19 countries sharing the euro fell by 0.7 percent quarter on quarter, for a 5.1-percent year-on-year decline.

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