Eurozone staggers to frail growth

THE eurozone managed only feeble growth in the third quarter and deflation hit a number of countries including Spain and Greece, writes Ruth Sunderland.

The single currency area as a whole saw growth of just 0.2pc compared with the previous three months, or an increase of 0.8pc on the same quarter of 2013.

Eurozone problems are likely to be high on the agenda at the G20 summit in Brisbane this weekend.

Germany narrowly avoided falling into recession after its economy grew by 0.1pc in the third quarter of 2014 following a strong rise in consumer spending.

Economists had been worried that Europe’s economic powerhouse would drop back into recession for the July to September period having contracted in the second quarter. Two consecutive quarters of contraction represent recession.

Private households can be thanked for the lucky escape, having sharply increased consumer spending.

France performed better than anticipated with 0.3pc growth. Italy fell into recession with two successive quarters of negative growth. The UK economy expanded by 0.7pc over the quarter, according to Eurostat.

‘It’s a sign of the worrying times when eurozone growth of 0.2pc can be seen as an upward surprise,’ said Howard Archer, chief UK and European economist at HIS Global Insight.

The statistics agency said annual inflation in the euro area was 0.4pc in October, down from 0.7pc a year ago. In Greece prices fell at an annual rate of 1.8pc and dropped by 0.2pc in Spain. Archer said it is a cause for ‘serious concern’ and that there is a significant risk it could ‘morph into deflation’.

The fear is that the eurozone could be headed for a Japanesestyle slump of falling prices, mounting real debt levels and stagnant growth.