By Paul Hannon and William Horobin
PARIS--Eurozone economic growth accelerated at the end of 2016 while the jobless rate fell to its lowest level since 2009, putting the currency area on a steadier footing at the start of a year clouded by political uncertainty.
The fourth quarter pickup allowed the eurozone economy to grow more rapidly than its U.S. counterpart during 2016 as a whole, the first time that has happened since the crisis-year of 2008.
But a number of headwinds make it far from certain the eurozone is set to embark on a more dynamic recovery after more than three years of modest growth.
Rising energy prices threaten to dampen consumer spending unless workerscan secure similarly large wage rises. Figures released Tuesday by the European Union's statistics agency showed consumer prices were 1.8% higher in Jan. than a year earlier, the highest inflation rate since Feb. 2013.
But higher wages have become slightly more likely with a sharper fall in unemployment toward the end of last year. Figures also released Tuesday by the Eurostat showed the jobless rate fell to 9.6% in Dec. from 9.7% in Nov., its lowest since May 2009.
Economists also worry that growth could be damped by high levels of uncertainty ahead of a series of key elections that could lead to gains for parties hostile to the euro and the European Union, and the start of difficult talks that will pave the way for the U.K.'s exit from the bloc.
So while European Central Bank President Mario Draghi noted signs of a growth pickup at the turn of the year during a news conference earlier this month, he also warned that "the risks surrounding the euro area growth outlook remain tilted to the downside and relate predominantly to global factors."
Among those global factors, business leaders are concerned about the impact on Europe if President Donald Trump follows through on his antitrade rhetoric with protectionist policies.
"If the U.S. turns in on itself, it will be very, very bad news," Pierre Gattaz, the head of France's largest business lobby Medef said in a television interview.
Buoyed by the ECB's stimulus programs and a weaker currency that appears to have aided exports, Eurosat said the eurozone's gross domestic product in the fourth quarter was 0.5% higher than in the three months to September, and 1.8% higher than in the final three months of 2015. On an annualized basis, growth picked up to 2.0% from 1.8% in the third quarter.
For 2016 as a whole, the economy expanded by 1.7%, compared with 1.6% for the U.S.. That marked a slowdown from 2015.
Figures also released Tuesday showed stronger consumer spending growth and a sharp rebound in business investment helped raise French GDP 0.4% quarter-on-quarter, a pickup from the 0.2% growth recorded in the third quarter.
In France, the leading presidential candidates are proposing significant departures from the current economic policy of President François Hollande's administration ahead of two rounds of voting in April and May.
National Front leader Marine Le Pen has centered her campaign on pulling France out of the euro and the EU, while the conservative candidate François Fillon says he would implement a deep austerity program coupled with tax cuts for business and tax hikes for consumers. Pro-business and pro-European centrist Emmanuel Macron--who has surged in the polls in recent weeks--has indicated he would concentrate on loosening labor laws to tackle unemployment.
Previously released figures indicateGermany's economic growth rate accelerated to 0.5% from 0.2% in the third quarter, while Spain's growth rate remained steady at 0.7%. But economists warn growth is likely to slow in the latter country after more than two years of strong recovery from a property and banking crisis.
"Spain is gradually on a path of deceleration," Daniele Antonucci, a Morgan Stanley economist, said.
Jeannette Neumann contributed to this article.
Write to Paul Hannon at email@example.com and William Horobin at William.Horobin@wsj.com
(END) Dow Jones Newswires
January 31, 2017 05:15 ET (10:15 GMT)
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