Eurozone sees slight upturn in growth

LONDON – The eurozone economy is failing to pick up any real momentum despite the good news that Greece has finally emerged from its crippling, six-year recession.

The 18-country currency union posted a 0.2 percent increase in output in the third quarter of the year. That’s not enough to make a serious dent in the near-record unemployment, and few economists think it’s going to get much better any time soon and may require more help from the European Central Bank.

The figure reported by the Eurostat statistics agency Friday was stronger than the 0.1 percent tick recorded in the second quarter, which most in the markets had expected to be repeated. It is also equivalent to an annualized rate of around 0.8 percent, far short of the U.S.’ 3.5 percent.

“After a false dawn when the eurozone exited recession just over a year ago the fundamentals and overall economic picture have failed to see a substantial improvement,” said Danae Kyriakopoulou, an economist at the Centre for Economic and Business Research.

Though the eurozone has avoided recession, weak growth is a problem because the region faces an additional threat: deflation.

At only 0.4 percent in the year to October, inflation is far below the 2 percent rate the European Central Bank looks for. As a result, the ECB is under pressure to provide more stimulus.

If prices start falling on a sustained basis, growth may be choked further as consumers delay purchases in the hope of cheaper bargains down the line and businesses fail to innovate and invest.

“Growth is still nowhere near strong enough to eat into the vast amount of spare capacity in the region and hence diminish the risks of deflation,” said Jonathan Loynes, chief European economist at Capital Economics. “As such, the numbers do nothing to ease the pressure on the ECB and governments to provide more policy stimulus.”

A more detailed look at Friday’s figures shows much of the growth was due to France expanding 0.3 percent during the quarter. Many had feared Europe’s second-biggest economy could sink back into recession.

France’s outperformance helped to make up for a muted 0.1 percent gain in Germany, Europe’s biggest economy. Germany has long been Europe’s driver of growth, but its key export and industrial sectors have seen a sharp drop in recent months, partly as a result of uncertainty over Ukraine.