Hopes for a euro zone recovery grew today after fresh data showing growth was already picking up last year and as the Dutch became the first to officially lift their forecast for expansion in 2002.
But economists warned the year would still be tough, which some said meant that the European Central Bank should cut interest rates again, and companies signalled that life in the real economy remained extremely uncertain.
New data showed Spanish fourth quarter growth beat expectations, Italian consumer confidence hit a 12-year high and even Germany, although technically in a recession, was not as weak as some had feared in the final months of last year.
That followed gains in leading indicators like Germany's Ifo index and ZEW survey, published yesterday, and economists said it now looked as if the bloc picked up in December and had entered 2002 with more momentum than many had dared hope.
With inflation expected to fall well below two per cent in the next few months, the European Central Bank should still have scope to cut interest rates in the months ahead.
In Germany, the Bundesbank's preliminary estimate of fourth quarter growth found it shrank by 0.25 per cent, marking the country's third consecutive quarter of decline.
But some economists had predicted an even deeper decline and the bank said the contractionary trend would appear to have come to an end.
"Germany was technically in a recession. But what matters is the future and leading indicators are pointing to an upturn," said economist Mr Jean-Francois Mercier at Schroder Salomon Smith Barney in London.
The ZEW survey of the German economy, which is regarded as a good predictor for the more widely followed Ifo index, rose in February for the fourth straight month, advancing 14.3 points to 50.2. Its expectations gauge rose 13.5 points to 56.6.
"It seems that positive momentum had been emerging before the start of the first quarter and that is a clear plus for the pace of growth at the start of the year," Mr Mercier said.