Eurozone GDP stagnated in Q4 2024 as Germany (-0.2 %) and France (-0.1 %) fell, reinforcing expectations of further ECB rate cuts. The euro held at $1.04 while bond yields fell. The divergence between ECB and Fed policy is widening as Chairman Jerome Powell signals that he is in "no hurry" to cut rates.
The eurozone economy stalled in the fourth quarter of 2024 as Germany and France, the bloc's two largest economies, posted worse-than-expected declines, reinforcing fears of persistent economic weakness in the region.
According to preliminary data released by Eurostat on Thursday, eurozone gross domestic product (GDP) remained unchanged from the previous quarter, a marked slowdown from the 0.41ppt growth recorded in the third quarter and below the 0.11ppt expansion forecast by analysts. This is the weakest result since the fourth quarter of 2023.
In the wider European Union (EU), GDP increased by 0.1 % quarter-on-quarter. In annual terms, seasonally adjusted GDP increased by 0.9 % in the euro area and by 1.1 % in the EU, a slight improvement on the previous quarter's 0.9 % and 1.0 %.
Germany and France disappoint, Portugal outperforms
The biggest drag on growth was Germany and France, which unexpectedly declined.
The German economy contracted by 0.2 %, worse than the expected 0.1 % decline, while French GDP fell by 0.1 %, missing expectations of stagnation. Meanwhile, the Italian economy remained unchanged for the second consecutive quarter, defying projections of moderate growth of 0.1 %.
On the other hand, some peripheral economies did well, with Portugal (+1.5 %) leading the growth rankings, followed by Lithuania (+0.9 %) and Spain (+0.8 %).
The weakest performers were Ireland (-1.3 %), Germany (-0.2 %) and France (-0.1 1 %).
"Again, it is the periphery that is driving most of the growth, with particularly strong expansion in Portugal and Spain. France and Germany remain a drag as both countries face well-documented structural and cyclical impediments in addition to political shocks," He told Kyle Chapman, foreign exchange analyst at the Ballinger Group.
Policy divergence between the ECB and the Fed is widening
The ECB's rate cut highlights the growing monetary policy divergence with the US Federal Reserve, which left rates steady at between 4.25 % and 4.50 % at its meeting on Wednesday.
Fed Chairman Jerome Powell reiterated that he was in "no hurry" to cut rates further and stressed the resilience of the US economy.
"The euro area economy is fragile, facing stagnant growth and a growing risk of recession. Q4 GDP data confirm near-zero growth and PMI surveys suggest a continued contraction in manufacturing. In contrast, the US economy remains strong, driven by consumer spending, a tight labour market and AI-driven investment," He told Boris Kovacevic, Global Macroeconomic Strategist at Convera.
Market reaction
The euro remained steady around USD 1.04 in morning European trading ahead of the ECB meeting. Government bond yields fell across the euro area, reflecting increased demand for safe assets.
The yield on the benchmark German Bund fell by 6 basis points to 2.52 %, while the yield on the French 10-year OAT fell to 3.26 %. The Italian BTP yield fell by 7 basis points to 3.60 %.
The reaction of Eurozone stocks was limited, with the Euro STOXX 50 index up 0.5 %. Dutch semiconductor giant ASML Holding N.V. gained 3.3 %, extending its 5.5% gain from Wednesday after posting better-than-expected results and issuing an improved outlook.
euronews/ gnews - RoZ
ILLUSTRATIVE PHOTO - pixabay
English 
Czech 
Spanish 
French 
Italian 
German 
Russian