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Europe’s economy still showing signs of weakness as construction suffers

THERE were further signs that the Eurozone’s economy is not out of the woods yet after construction output in Europe fell to its lowest level for a decade and investor confidence in Germany was weaker than expected.

Activity in the construction sector fell by eight per cent in the 12 months to November after property bubbles popped in both Ireland and Spain as a result of the financial crisis.

News that the German economy, regarded as the Eurozone’s most resilient, may have stalled in the fourth quarter also hurt the euro yesterday.

The ZEW centre for European Economic Research announced that investor confidence in Germany declined more than expected in January. Expectations of economic performance in the next six months fell to 47.2, down from 50.4, the fourth monthly fall in a row. However, the index has been at relatively high levels since the recovery in the financial markets last March.

After emerging from recession in the third quarter of 2009, the latest data from the German economy points to a slower recovery than analysts first anticipated.

Although Germany is expected to lead a moderate Eurozone recovery this year, if the economy stagnated in the last three months of 2009 many analysts believe that points to slower Eurozone growth than the markets expect.