By Ralph Atkins in Frankfurt
mrt 4 2008
SourceEurozone consumers failed to ride to the rescue of the region's economy at the end of last year, according to data on Tuesday that called into doubt the official optimism about economic growth in 2008.
Hit by sharp price rises and worries about the economic outlook, eurozone consumers reduced their spending by 0.1 per cent in the final quarter of 2007 - the weakest three-month performance since the end of 2001, according to Eurostat, the European Union's statistical office.
The figures, which were particularly bad in Germany, set back hopes by policymakers that stronger consumer spending in home markets would help offset the effects of a deteriorating world economic outlook. The European Central Bank has argued that the impact of financial market turmoil would be limited and that falls in unemployment to levels not seen for 25 years would help consumption.
Adding to the worrying economic news, Germany's VDMA engineering association indicated that the industrial recovery in Europe's largest economy could be losing pace. Orders growth in January was modest, with domestic orders stagnating, the association said.
Growth in the 15-country eurozone late last year was largely powered by investment spending, which could be vulnerable in coming months to the fallout from financial market turmoil.
Eurozone consumers have long been more cautious than their US or UK counterparts. But the fourth-quarter data highlighted the exceptional impact on their behaviour of higher prices, especially for foods and fuels.
"Prices are going up and that has eroded spending power," said Julian Callow at Barclays Capital. The possibility of higher prices in the future might have been expected to encourage the bringing forward of purchases, but worries about the economic outlook appeared also to have played a role, he argued. "You never know what the future holds; that is where the theory breaks down a bit."