Eurozone economy grows as cheap oil takes hold

Economic activity in the eurozone picked up slightly in fourth quarter, official EU data showed Friday, in a sign that the benefits of cheap oil and stimulus by the European Central Bank are taking effect.
The official Eurostat agency said eurozone economy expanded by 0.3 percent in the fourth quarter and 0.9 for all of 2014, slightly better than expected but too weak to convincingly signal a full-blown recovery.
The data was higher than a forecast of 0.8 percent made by the European Commission last week.
The data comes as renewed fears over the plight of heavily indebted Greece, where growth stalled as the leftists government faces dangerous default if its massive bailout is not extended by the end of the month.
"Such an increase, while modest by international standards, would be the sharpest since the first quarter of 2011," said Jennifer McKeown, senior European economist at Capital Economist.
"This will add to hopes that the effects of the crisis in Greece have so far been offset by the benefits of falls in the oil price and the euro exchange rate," she said.
The growth data also lands a month after the European Central Bank announced an unprecedented bond-buying programme to avert deflation in the eurozone.
The ECB's version of so-called quantitative easing has already decreased government borrowing prices across most of the currency bloc and weakened the euro, which should help to boost exports in Europe.
"For the first time in two years, we can say that the region is going for solid growth," Anna Maria Grimaldi, an economist at Intesa Sanpaolo SpA in Milan, told Bloomberg News.
"The euro area is supported by the very strong tailwinds of the fall of the euro, the fall of oil prices and the fall of interest rates sparked by ECB QE."
Growth was driven by an unexpectedly strong expansion in Germany and Spain.
The German economy, Europe's biggest, expanded surprisingly a strongly 0.7 percent in the fourth quarter of 2014, driven primarily by robust consumer spending, bringing full-year growth to 1.6 percent.
Spain also grew a robust 0.7 percent in the fourth quarter, raising hopes that the alarming levels of unemployment may continue to fall from the current 24 percent.
"The recovery is likely to gather some pace over the coming quarters and a combination of positive shocks should sustain activity throughout the year," Clemente De Lucia of BNP Paribas said in a note.
Alarmingly however, Greece's recovery stalled in the final quarter of last year as the economy contracted by 0.2 percent, even if growth hit 0.8 percent for the year.
Italy, the third biggest economy in the eurozone, was also a source of concern.
Output was unchanged from the previous quarter when it dropped 0.1 percent, though this was slightly better than a Bloomberg News survey of analysts that expected another 0.1 percent contraction.
From a year earlier, GDP fell 0.3 percent, but analysts said the recession in Italy was likely over.
France's economy meanwhile expanded by a mere 0.4 percent last year as investment slumped.
"It's obviously still too weak but conditions are met to allow a more definite upturn in activity in 2015," French Finance Minister Michel Sapin told reporters.