Eurozone economy stagnates in Q4

The eurozone economy stagnated in the final quarter of last year, according to data released on Wednesday by Eurostat.

Growth for the bloc was revised down to 0.0% quarter-on-quarter from a previous estimate of 0.1%. This was down from upwardly-revised 0.4% growth in the third quarter.

Compared with the fourth quarter of 2021, growth was 1.8%, down from a previous estimate of 1.9%.

Separate figures from Eurostat showed that employment grew 0.3% on the quarter in the final quarter of last year.

Pantheon Macroeconomics said today's GDP figures will add to the European Central Bank’s conviction of relative economic resilience.

"EZ GDP in Q4 still came in better than the -0.2% fall the ECB expected in December, so it does more for ECB hawks’ calls to continue on a steep tightening path than for the doves’ call for prudence," said senior Europe economist Melanie Debono.

"We look for the ECB to raise interest rates by 50bp next week, and then again in May, before a 25bp hike in June, taking the deposit rate to 3.75% by the middle of the year.

"The main new information in today’s report is the details. Domestic demand was a drag on growth despite an increase in government expenditure. Consumer spending sank by 0.9% on the quarter, reversing its increase in Q3 and investment, ex-inventories, dropped by 3.6%, after rising by 3.9% in the previous quarter.

"In contrast, net trade was a boost to growth. It added nearly 1.0pp to the headline, as imports sank by 1.9- split by a 1.1% fall in goods imports and 3.7% drop in services imports - and exports rose by a measly 0.1%, as they were held back by a fall in services exports.

"All told, the outcome in Q4, coupled with an upward revision to Q3’s headline, means that GDP rose by 3.5% last year, slowing from a 5.3% increase in 2021."