Importantly, the bloc’s largest economy, Germany, recorded a return to growth, with its gross domestic product expanding by 0.2 percent after contraction in the previous two quarters. France’s GDP increased by a similar amount, while Spain and Portugal each recorded impressive growth of 0.7 percent. Italy’s economy accelerated – expanding by 0.3 percent in the fourth quarter of 2023 versus 0.1 percent.
While monthly data shows services were largely responsible for the uptick, there have also been recent signs of stabilization in industrial production, which was hit by rising energy prices in 2022, helping the recovery . German business confidence, measured by the Ifo institute, has been rising throughout the year. While there have been no strong changes yet as a result, the Czech Republic and Hungary, two countries whose manufacturing sectors are deeply integrated with Germany, both reported stronger-than-expected growth in the quarter on Tuesday.
“This is no flash-in-the-pan,” UniCredit analyst Andreas Reuss wrote of the German data. “In our view, the worst is finally behind us, as rising global trade coupled with lower inflation rates compared to last year will likely lead to more moderate growth over the next few quarters.”