The 12-member eurozone economy has entered the new year on a sluggish note with a raft of key data released this week showing growth in the currency bloc as last year came to an end falling short of forecasts.
While the data, which included fourth-quarter growth figures for the eurozone as a whole and its three biggest economies -- Germany, France and Italy -- showed the region as having finally laid aside a prolonged period of stagnation, the series of economic reports confirm that recovery is edging forward at a slow pace.
"The upward trend [in the economy] will continue during the first half of the year, however, without being boosted by any noticeable dynamic," said Ralph Solveen, European economist with Commerzbank AG.
Last week, data released by the European Commission's statistics office showed the economy built around the euro slowing in the run-up to the end of last year.
After expanding by 0.4 percent quarter on quarter in the third quarter, the eurozone grew by 0.3 percent in the final three months of the year. Economists had predicted another 0.4 percent rise in the fourth quarter.
The eurozone economy grew by an insipid 0.4 percent last year, the data showed, further underscoring the fragile state of Europe's recovery.
National data released this week showed France chalking up a fourth-quarter growth rate of 0.5 percent to record an unimpressive 0.2 percent growth rate for the year with Germany posting a meager growth of 0.2 percent in the final three months of last year with Europe's biggest economy contracting by 0.1 percent last year.
Italy followed up Friday with equally disappointing data with the eurozone's third-biggest economy stagnating in the fourth quarter to produce an annual year-on-year growth rate of just 0.1 percent.
After growing at 0.4 percent in 2002, Italy slumped into recession during the first half of last year.
But while France's fourth-quarter growth rate was the strongest in six quarters, the worse-than-forecast German growth data raised the prospect that Germany might again act as something of a drag on the European economy as global growth rebounds.
Coinciding with the release of the German and French figures, data released by the Netherlands showed the eurozone's fifth-biggest economy posting its first increase in growth in a year during the final quarter of last year when the Dutch economy grew by 0.3 percent.
Either way, the German data point to the nation's long-awaited economic recovery having gotten off to a slow start with economists expecting the country to post a growth rate this year of about 1.7 percent despite data showing key industry order books and output expanding as the new year commenced.
As a sign that France too might expect less-than-sparkling growth this year, the Bank of France last week cut its forecast for growth in the first quarter of this year to 0.5 percent from a previous 0.7 percent with French output for last month coming in at 0.3 percent month-on-month and also falling short of analysts' forecasts.
Germany's growth prospects received something of a boost last Thursday when the nation's biggest industrial union IG Metall and employers hammered out a wage deal, consequently averting the threat of a major strike at a critical time in the nation's recovery.
The deal includes a 2.2 percent raise for the year starting March 1 and another 2.7 percent for 14 months starting next March 1.
After a modest start of the new economic year, growth in the eurozone is forecast to come at just below 2 percent this year.
Moreover economists are concerned that Europe's somewhat slow recovery could be placed at risk by a soaring euro hitting the region's export machine and high unemployment dampening consumer spending.
The euro was trading last Friday at over US$1.28 following the release of the latest eurozone growth data after this week appearing to launch a new push to climb back up toward the record high of US$1.29 that it reached last month.
Earlier this year the soaring euro triggered a round of verbal intervention by European Central Bank officials in a bid to talk the euro down so as to stave off having to cut interest rates and to ensure that the currency's strength did not place exports at risk.
To be sure, the data released this week underscored the importance of exports in helping to power the eurozone's economy out of last year's recession with German exports growing by 7.1 percent last year.
Germany's exports hit a record high last year as a recovery as global demand picked up, as a result helping to offset the impact on foreign orders of the surging euro, which charged ahead by about 20 percent over the last 12 months.
But while business confidence in the eurozone remains at high levels, consumer spending in both France and Germany, in particular, remains lackluster. This is adding to worries about the pace of export growth possibly slowing later in the year before consumer spending has picked up, which in turn could cast a shadow over Europe's recovery.
Highlighting these concerns industry data released last Thursday showed crucial car sales falling last month in both France and Germany, Europe's biggest car market.
Indeed, Europe's biggest car maker, German-based Volkswagen AG, reported a 10 percent drop in sales. Likewise, France's flagship carmaker, PSA Peugeot Citroen also posted a sharp drop in sales.
Germany's auto industry association said this week that the number of new passenger cars registered in the nation fell 12 percent last month with auto exports dropped 10 percent.
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