Eurozone grows at strongest rate since before financial crisis
Eurozone economic expansion continued at a lively pace at the end of last year so that 2017 recorded the best economic growth in the region since before the global financial crisis, while a survey of economic sentiment indicated more is to come.
A preliminary 'flash' estimate of euro area gross domestic product in the three months to the end of December showed the economy continued to grow at a 0.6% quarter-on-quarter rate as it had to the third quarter, as economists expected.
While there was no detail in the Eurostat release, France also released GDP growth numbers earlier on Tuesday that showed 0.6% growth.
Eurozone GDP for the fourth quarter was up 2.6% compared to the same quarter last year, which was slightly short of the market's expectations for 2.7%.
For the whole of 2017, the bloc grew 2.5% compared to the previous year, which was strongest growth since the 3% rate from 2007.
Meanwhile, the European Sentiment Indicator reading of 114.7 fell some way short of consensus forecasts for January of 116.3, mainly because the back data was revised, with December's reading marked down to 115.3. At the country level, declines in sentiment in France and Italy more than offset small improvements in sentiment in Germany and Spain.
Of the constituent parts, consumer confidence for January came out as expected and unmoved from the previous month at 1.3, while services sentiment fell to 16.7 from 18, industrial confidence was printed at 8.8 in line with the revised figure from a month earlier, and business climate sentiment of 1.54 was down from 1.6, which had been revised from 1.66.
More important, said economist Stephen Brown at Capital Economics, the ESI remains above its fourth quarter average of 114.3.
"While January’s fall in the euro-zone ESI – the first in eight months – could be a sign that the ESI is approaching a plateau, on its most recent form the indicator still seems consistent with annual GDP growth accelerating Q4’s 2.7% to a little over 3%."
Alongside signs of strong growth, in January consumers’ 12-month inflation expectations jumped to a five-year high. Rising inflation expectations further increase the chance that the ECB will bring it asset purchases to an end this year, but the fact that expectations point to core inflation rising to just 1.5% suggests that interest rate hikes are a long way off.