(Bloomberg) -- The euro zone unexpectedly stagnated at the end of last year as government collapses in its top two economies bruised confidence among businesses and consumers.
Most Read from Bloomberg
-
Manhattan’s Morning Commute Time Drops With New Congestion Toll
-
US Students’ Reading Scores Drop to Worst in More Than 20 Years
-
Texas HOA Charged With Discrimination for Banning Section 8 Renters
Fourth-quarter gross domestic product was unchanged from the previous three months, Eurostat said, defying analyst estimates that the 20-nation bloc eked out growth of 0.1%. Output fell 0.2% in Germany and 0.1% in France.
Over the whole of 2024, euro-area GDP rose 0.7%, Eurostat said.
The region is struggling to find growth drivers as a manufacturing malaise in Germany weighs on output and sentiment is soured by the threat of punitive trade measures from US President Donald Trump. Italy and Austria both saw GDP flatline.
Some help is on the way from the European Central Bank, which is widely expected to cut its deposit rate by another quarter-point later Thursday, to 2.75%. But policymakers in Frankfurt still have an eye on inflation. Separate data showed Spanish consumer prices rose 2.9% this month — more than analysts had expected.
Investors added to bets on ECB rate cuts, pricing 94 basis points of easing through year-end, compared with 89 basis points on Wednesday. That implies three quarter-point reductions and an almost 80% chance of a fourth.
Bonds extended gains, sending Germany’s 10-year yield six basis points lower to 2.53%. The euro fell 0.2% to about $1.04 — its lowest level of the day.
What Bloomberg Economics Says...
“The big picture is that momentum has ebbed, supporting the case for an ECB rate cut later today and further easing this year. How many cuts we get and how fast will depend partly on how long it takes for growth to pick up again.”
—Jamie Rush, chief European economist. Click here for full REACT
The uncertainty over Trump’s plans is already seeping through to companies, with talk of tariffs dominating earnings calls this month, according to a Bloomberg analysis.
For Germany, the disappointing data come less than a month before a snap election that’ll probably see Chancellor Olaf Scholz ousted by Friedrich Merz, who leads the conservative CDU/CSU bloc and is promising lower taxes and fewer regulations.
While some hope that the Feb. 23 ballot will bring more growth-oriented policies capable of helping drag Europe’s largest economy and the 20-nation euro zone as a whole out of their respective ruts, many analysts are skeptical.