2024.01.3013:25:00UTC+00Eurozone Narrowly Avoids Recession

The euro area economy stagnated in the fourth quarter avoiding a technical recession as the southern European economies, mainly Spain and Italy, achieved better growth.

Gross domestic product remained flat after falling 0.1 percent in the third quarter, the preliminary flash estimate from Eurostat showed on Tuesday.

Economists had forecast another 0.1 percent fall in the fourth quarter, which would have pushed the currency bloc into a recession. Year-on-year, GDP gained 0.1 percent, while it was forecast to post nil growth as seen in the third quarter.

The next estimates for the fourth quarter will be released on February 14.

According to the first estimate for 2023, GDP advanced 0.5 percent, data showed.

The economy will flat-line in the first half of the year too as the effects of past monetary tightening continue to feed through and fiscal policy becomes more restrictive, Capital Economics' economist Jack Allen-Reynolds said.

A material improvement in the eurozone economy is likely much later in the year, ING economist Bert Colijn said. The German economy contracted 0.3 percent in the fourth quarter after stagnating in the previous two quarters.

There was a marked decline in gross fixed capital formation in construction and in machinery and equipment, in Germany.

The think tank ifo Institute on Tuesday forecast a 0.2 percent contraction in the economic output of the biggest euro economy for the first quarter that is set to push it into a recession.

France's economy stagnated in the fourth quarter as the improvement in foreign trade was offset by the falling investment and household spending.

GDP remained flat in both the third and fourth quarters.

By contrast, there was an unexpected boost to growth from the Spanish economy.

Spain registered a 0.6 percent expansion, faster than the 0.4 percent growth in the third quarter. GDP growth was forecast to ease to 0.2 percent.

Italy also fared better than expected in the fourth quarter, with growth doubling to 0.2 percent from 0.1 percent in the third quarter. Another southern European economy, Portugal grew 0.8 percent sequentially after posting a 0.2 percent contraction.

Elsewhere, Austria moved out of recession on signs of resilience in the industrial sector. GDP rose 0.2 percent, in contrast to the 0.5 percent fall a quarter ago.