Euro area GDP shrinks by a bit less than expected in Q4 2020

The euro area economy shrank by a tad less than feared at the end of 2020, revised data showed.

According to Eurostat, in seasonally adjusted terms the single currency bloc's gross domestic product dropped at a quarter-on-quarter pace of 0.6%.

That was better than the preliminary reading of -0.7% and followed a rebound of 12.4% over the three months to September and a 11.7% drop in the second quarter.

When compared to the last quarter of 2019, GDP was 5.0% lower.

From among the bloc's largest economies, growth in Germany (0.1%) and Spain (0.4%) accounted for the upwards surprise, while GDP in France (-1.3%), Italy (-2.0%) and the Netherlands (-0.1%) shrank.

Nonetheless, in year-on-year terms Spanish GDP fared worst by a wide marging, collapsing by 9.1%, although that was better than the 10-12% that some eocnomists had at one point anticipated.

German GDP on the other hand was down by a comparatively moderate 3.9%, that of France by 5.0%, alongside falls of 6.6% for Italy and of 3.0% in the Netherlands.

As of 1146 GMT, the yield on the benchmark Bund was two basis points higher to -0.37%.

In parallel, euro/dollar was strengthening 0.29% to 1.2164.

Claus Vistesen, chief euro area economist at Pantheon Macroeconomics, labelled Tuesday's revisions "trivial".

Looking ahead, his own forecast was for Eurozone GDP to contract at a 1-2.0% pace quarter-on-quarter over the three months to March before a "tepid" rebound ensued in the second quarter.

"By H2 the economy hopefully will be off to the post-vaccine races, but that baseline is uncertain too, at this point."