German snow dampens GDP for Eurozone

Julian Harris
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GROWTH in the Eurozone was more sluggish than expected in the final three months of last year, reaching just 0.3 per cent, official data showed yesterday.

The euro fell in early trading, dropping close to $1.346 (£0.84), as Germany reported fourth quarter growth of 0.4 per cent, below expectations. However, the currency recovered against the dollar as the day progressed.

Germany’s disappointing result was blamed partly on adverse weather conditions, mirroring the situation in the UK from earlier in the month, where snow was blamed for an estimated half percentage point drop in GDP at the end of 2010.

“There is really only one important reason why growth slowed: the winter weather,” commented Andreas Rees, an economist at Unicredit. “There is no reason for concern. This is not the beginning of the end of the recovery, just a pause.”

German confidence for the near future remains strong, according to the Zew index, released yesterday.

A positive balance of 15.7 per cent of surveyed investors expect conditions to improve over the coming six months.

And the Zew’s measure of current conditions rose above expectations to 85.2 from 82.8, hitting its highest level since July 2007.

The French economy expanded by 0.3 per cent over the same period – half the rate expected by economists.

Strong exporting economies led the way for the Eurozone, with growth of 0.6 per cent in Austria and Holland.

However, Mediterranean and peripheral economies continue to drag on the 17 country area.

Spain (0.2 per cent) and Italy (0.06 per cent) recorded weak growth, while the economy contracted in troubled Portugal (-0.3 per cent) and Greece (-1.4 per cent).