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Eurozone Q4 Growth Reflects Broad-Based Recovery

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The Eurozone economy expanded as initially estimated in the fourth quarter on broad-based support from spending, investment and exports.

Gross domestic product grew 0.3 percent sequentially, slightly faster than the third quarter's 0.2 percent expansion, second estimates from Eurostat showed Friday. The statistical office confirmed the estimate released on February 13.

All components on the expenditure side of GDP expanded in the fourth quarter. While the growth in household spending moderated to 0.4 percent from 0.5 percent, government spending growth remained unchanged at 0.2 percent.

Investment increased by 0.4 percent, after staying flat a quarter ago. At the same time, growth in exports eased to 0.8 percent from 1.5 percent and that in imports to 0.4 percent from 1.7 percent.

Year-on-year, the economy expanded 0.9 percent as estimated, which was marginally above the 0.8 percent growth posted in the third quarter.

Over the whole year of 2014, the 19-nation currency bloc expanded 0.9 percent versus a 0.5 percent contraction in 2013.

In the fourth quarter, growth in the EU28 came in at 0.4 percent versus 0.3 percent in the prior quarter. On a yearly basis, growth improved to 1.3 percent from 1.2 percent.

The European Central Bank President Mario Draghi yesterday said the bank will start purchasing public sector bonds in the secondary market on March 9, under its $1.1 trillion stimulus plan. The bank raised its consumer price outlook and expects prices to rise 1.5 percent in 2016 after stagnating this year.

The euro area growth forecast for this year was raised to 1.5 percent from 1 percent seen in December and the projection for next year was boosted to 1.9 percent from 1.5 percent.

Jessica Hinds, a European economist at Capital Economics, said she continues to expect only modest euro-zone GDP growth of around 1 percent this year and next, which is weaker than the ECB's latest forecasts and too slow to erode the large amount of spare capacity or reduce the threat of deflation.

However, IHS Global Insight's Chief European Economist Howard Archer said with low oil prices, a markedly weaker euro and substantial ECB stimulus, Eurozone should be able to achieve growth of 1.6 percent.

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