BRUSSELS, Feb 12 (AFP): Indicators to be released this coming week will show that growth in the 12-nation eurozone slowed somewhat in the fourth quarter of 2005, although the outlook for Germany is still promising, according to economists.
The eurozone as a whole is expected to report, provisionally, that gross domestic product (GDP) grew just 0.4 per cent in October-December last year, down from a relatively strong 0.6 per cent in third quarter, economists said Friday.
This predicted weakening in eurozone activity follows France's announcement of a disappointing 0.2-per cent growth in GDP in the fourth quarter and expectations that Germany will say its growth also slowed to just 0.2 per cent in the fourth quarter, from 0.6 per cent in the third.
"We expect euro-area GDP to growth just 0.4 per cent in the fourth quarter," Credit Suisse economists said.
"The euro-area average is likely to be dragged down by what should be a weak German reading. The Bundesbank expects German GDP to be only up marginally," they said.
"While survey indicators, such as the manufacturing and service sector purchasing managers' indices, point to another quarter of above-trend growth, the hard data have painted a more downbeat picture," HSBC economists noted.
Royal Bank of Scotland economists agreed that "although survey evidence for the fourth quarter has been very upbeat, hard economic data have disappointed".
They predicted that the German economy had stagnated in the fourth quarter of 2005 and that Italian growth had also slowed from the third quarter.
Goldman Sachs economists were even more pessimistic, saying they expected eurozone GDP growth "to fall to 0.3 per cent in the fourth quarter, with risks to the downside".
They too forecast flat German growth for the October- December 2005. However, several brokerages said prospects for the eurozone's largest economy were still bright overall.
Germany released a raft of positive economic data in January and this week's ZEW indicator of German economic expectations index is expected to reinforce the optimism of certain brokerages.
"The February ZEW sentiment survey should confirm the recent optimism about the German economy," UBS economists said.
Goldman Sachs economists concurred. "While fourth-quarter activity data are disappointing, business surveys should continue to point to strong growth ahead," they said.
HSBC economists were more cautious, saying the monthly ZEW index has reached a level associated with previous cyclical highs.
They said "a nearly unchanged figure of 70.0" points was "likely" when the February ZEW is published Tuesday.
The ZEW indicator represents the balance between positive and negative expectations for the economy over the next six months. If most analysts and institutional investors polled believe the economy will improve, the index shows a plus. If most expect a deterioration, it shows a minus. There are other eurozone economic statistics due to be released during the coming week, including the industrial output picture, which is forecast to remain patchy.
Italy is expected to post a healthy rise in industrial output for December 2005, despite unexpected falls in Germany and France, but the overall eurozone figure is forecast to ease back from November's sharp gains.
"A strong rise in November industrial production of 1.3 per cent is likely to be partially reversed in December," HSBC economists said.
"We know, for example, that German industrial production fell 0.5 per cent on the month and expect a similar decline for the euro zone as a whole," they said.