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The eurozone economic system grew 0.3 per cent within the last three months of final yr, returning the bloc to its pre-pandemic stage of output regardless of a pointy slowdown from the earlier quarter as coronavirus infections hit document ranges.

Fourth-quarter development within the 19-country bloc was in step with the expectations of economists polled by Reuters, because it decelerated from 2.2 per cent development within the earlier three-month interval. Family spending continued to develop in lots of nations, albeit at a slower tempo, whereas output was additionally boosted by companies restocking inventories.

Contractions of output in Germany and Austria had been offset by quarter-on-quarter development in nations together with Spain, France and Italy, because the bloc confirmed elevated resilience to the impression of the pandemic, which had plunged it right into a document post-war recession in 2020.

Eurostat mentioned on Monday that its first estimate of full-year gross home product confirmed development of 5.2 per cent in each the eurozone and the broader EU for 2021 — the area’s quickest growth since 1971, however slower than the US economic system’s 5.7 per cent development final yr.

Line chart of GDP growth (annual %) showing Eurozone rebounds from Covid crisis

Economists calculated that the only forex space had rebounded to pre-pandemic ranges of GDP.

Eurozone development is predicted to stay sluggish within the first few months of this yr earlier than financial exercise picks up once more as coronavirus restrictions are loosened and provide chain bottlenecks ease.

“Restrictions in lots of nations to counter the Omicron wave are set to be lifted quickly, permitting the restoration to renew within the coming months,” mentioned Jessica Hinds, senior Europe economist at Capital Economics.

Italy’s economic system continued to beat expectations with development of 0.6 per cent within the fourth quarter, resulting in full-year development of 6.4 per cent, in accordance with figures printed on Monday. It was the quickest annual growth since a minimum of 1995, in accordance with Reuters. The expansion was attributed to larger home demand driving elevated output in business and companies.

UniCredit’s headquarters in Milan
UniCredit’s headquarters in Milan. Italy’s economic system has rebounded extra sharply than many economists initially anticipated © Francesca Volpi/Bloomberg

The eurozone’s third-largest economic system has rebounded extra sharply than many economists initially anticipated from its decline of virtually 9 per cent in 2020 and is now near returning to pre-pandemic ranges of GDP.

“This confirms the nation’s improved potential to get better from disaster in comparison with earlier episodes,” mentioned Loredana Maria Federico, chief Italian economist at UniCredit.

Whereas the most recent wave of Covid-19 circumstances has led to tighter restrictions that dented client spending and extended provide chain bottlenecks which have squeezed manufacturing, total financial exercise in Europe has been much less disrupted than in earlier waves.

Line chart of GDP index rebased, Q4 2019=100 showing The eurozone economy is back to its pre-pandemic level

The exception has been Germany, the place the economic system shrank 0.7 per cent within the fourth quarter, as a drop in client spending and provide constraints on manufacturing weighed on total output.

The lacklustre efficiency of Europe’s largest economic system left it 1.5 per cent beneath pre-pandemic ranges of GDP. In distinction, the US economic system was 3.1 per cent above its pre-pandemic stage within the fourth quarter, whereas France was 0.9 per cent above pre-crisis GDP ranges.

Spain achieved the quickest development within the fourth quarter, increasing 2 per cent. However the nation’s larger reliance on pandemic-hit tourism has weighed on its restoration and its GDP was nonetheless 4 per cent beneath pre-pandemic ranges.

“There are a whole lot of country-specific drivers, not solely extra pandemic-related results such because the timing of restrictions and provide chain issues however in all probability additionally how direct the hit was from excessive electrical energy costs,” mentioned Daniel Bergvall, an economist at SEB.

Austria was one of many weakest eurozone economies within the fourth quarter, when its economic system shrank 2.2 per cent after it imposed a lockdown to sort out hovering coronavirus infections. In distinction, Portugal had lighter curbs and its economic system grew 1.6 per cent.

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