Growth slows at end of 2021 in 19 countries that use euro

BRUSSELS

The European economy slowed noticeably at the end of last year as surging COVID-19 cases driven by the Omicron variant piled on top of supply shortages and rising energy prices that dented consumer purchasing power.

In the 19 countries that use the euro, growth in the last three months of 2021 came in at 0.3 percent, the European Union’s statistics agency said yesterday. That compared with growth of 2.2 percent in the July-September quarter.
For the year, it was 5.2 percent, underlining how Europe’s economic recovery from the pandemic has moved at a somewhat slower pace than the rebound in the United States, where 2021 growth was 5.7 percent. U.S. growth was boosted by what economists say was a comparatively larger share of federal stimulus spending than what took place in Europe.
Eurostat said the full 27-country EU economy, which includes several large economies that do not use the euro such as Poland and Sweden, grew by 5.9 percent.

Much of the slowdown came in Germany, Europe’s largest economy, where difficulty getting needed parts held back its export-heavy manufacturing economy. France, Spain and Italy showed stronger growth.
A major reason for Europe’s slowdown was spiking COVID-19 cases that led to new and shifting restrictions and deterred cautious consumers from spending money on restaurants, hotels and entertainment. That comes on top of clogged supply chains, which are leaving the eurozone’s export-oriented manufacturing sector unable to fill orders, and higher prices for oil, natural gas and electricity, which are weighing on businesses and consumers.
And the friction in Europe’s gears is not over yet. Growth “might weaken further” in the current quarter, according to economists at UniCredit bank.

Germany, usually a growth motor for the eurozone, shrank 0.7 percent in the fourth quarter and would slide into a shallow recession if growth is negative again in the first three months of this year. Two straight quarters of declining output is one definition of a recession.
Second largest eurozone economy France, on the other hand, saw growth of 0.7 percent over the previous quarter, leaving the year’s figure at 7 percent. That is the strongest since 1969.
Analysts foresee a pickup in the second quarter of this year as supply chain difficulties ease as hoped.

The IMF last week cut its world GDP forecast for 2022 to 4.4 percent because of the surprise challenges posed by the Omicron variant.
The eurozone inflation rate was a record 5 percent in December and unemployment was running at 7.2 percent in November, the latest figures available.