The Euro Area real GDP growth was 2.2% over year in the fourth quarter, which has been the lowest rate during the last two years (table 1).
The growth rate of all components of GDP decelerated. As consumers reduced their expenditure by 0.1% in the fourth quarter compared with the third quarter, the growth of this component was only 1.1% over year. It has been the lowest growth rate since the fourth quarter of 2003 (chart 1).
In spite of corporations high profitability investments rose by 0.8% compared with the third quarter and subtracted growth rate to 3.7% over year. Fixed investments contributed to the GDP growth by 0.8 percentage points on a yearly basis. In the fourth quarter government expenditure declined by 0.1% q/q, while it advanced by 0.7% in the third quarter of 2007. On a yearly basis government expenditure rose by 1.8% and increased GDP by 0.4 percentage points. It is important to note, that the share of this component in the Euro Area GDP was 20%, in comparison with 16.2% and 17.6% in the US and Japan, accordingly.
Due to the strong Euro export rose by 0.5% q/q. Export increased by 4.4% during the last twelve months, which has been nearly a twice lower then in the US and Japan. As import growth rate also decelerated the positive impact of international trade on GDP was 0.5 percentage points over year.
The crisis in the US real estate market negatively impacted the Euro Area construction industry, which rose only by 0.2% q/q. As a result, double-ply lowering was stated in construction to 1% over year. It contributed 0.1 percentage points to the GDP growth. Other sources of economic growth moderation were trade, transport and communication spheres, where sales remain unchanged on a quarterly basis. Manufacturing, including energy, was a subject to the negative impact of the following factors: strengthening Euro, the US economic growth deceleration and record high commodity prices. In the fourth quarter, manufacturing soared by 3.7% over year.
Despite the credit crunch and huge losses of investment banks, including European ones, the growth rate in the Euro Area financial and business services industry was 0.8% q/q and 3% y/y. The quarterly gain was 0.1% higher than in the third and second quarters. Strong growth in this sector, which ensured a quarter of GDP, edged up the Euro Area economic growth by 0.8 percentage points on a yearly basis.
Thanks to the European Union government efforts agricultural production sharply increased. During the last three months of last year agricultural industry showed 1.2% gain and a notably accelerated growth rate over year.
In the fourth quarter Germany’s GDP, which accounts for one third of the Euro Area economy, rose by 1.8% q/q and 0.3% y/y. Over year growth rate was 0.7% lower than in the third quarter of 2007. It was the worst result among the big European countries. Spain, which showed the best results in the Euro Area, gradually is giving up its positions. This country GDP soared by 0.8% q/q. As a result, the economic growth rate moderated to 3.5% following a 3.8% gain in the third quarter of last year. From the big three only France demonstrated sings of activity. In the forth quarter this country GDP rose by 0.3% q/q and 2.1 y/y.
The pace economic of the growth in the Euro Area is reducing, due to the crisis in the US mortgage and asset backed scurrilities, record high commodity prices and strong Euro. The drop of real estate prices, reduction of residential construction and personal expenditure in the US had a negative impact on the Euro Area economy. Investors showed strong vigilance and reduced their investments in the Europe real estate market. Aggressive actions of the Fed pushed higher Euro and had additional pressure on the Euro Area economy, as for the most of countries of the Old World export was an important component of GDP.
As the temporal gap between these exogenous factors and economic growth is from 6 to 9 months, then in our opinion the Euro Area economic growth moderation will accelerate during this year.
EURO AREA ECONOMIC INDICATORS
Table 1
|
|
4q. 2007
|
3q. 2007
|
2q. 2007
|
1q. 2007
|
|
Real GDP
|
|
|
- y/y
|
2.2
|
2.6
|
2.4
|
3.1
|
|
- m/m
|
0.4
|
0.7
|
0.3
|
0.8
|
|
Private consumption, y/y
|
1.1
|
1.6
|
1.6
|
1.4
|
|
Government consumption, y/y
|
3.7
|
4.5
|
4.1
|
6.9
|
|
Fixed capital formation, y/y
|
1.8
|
2.2
|
2.1
|
2.2
|
|
Export, y/y
|
4.4
|
7.1
|
5.8
|
6.6
|
|
Import, y/y
|
3.8
|
5.9
|
5.0
|
6.0
|
|
Country breakdown, q/q
|
|
|
Germany
|
0.3
|
0.7
|
0.2
|
0.6
|
|
France
|
0.3
|
0.8
|
0.3
|
0.6
|
|
Italy
|
n/a
|
0.4
|
0.1
|
0.3
|
|
Spain
|
0.8
|
0.7
|
0.9
|
1.0
|
|
Country breakdown, y/y
|
|
|
|
|
|
Germany
|
1.8
|
2.5
|
2.6
|
3.7
|
|
France
|
2.1
|
2.2
|
1.3
|
1.9
|
|
Italy
|
n/a
|
1.9
|
1.8
|
2.4
|
|
Spain
|
3.5
|
3.8
|
4.0
|
4.1
|
Source: Eurostat
Chart 1
Source: Eurostat
