By Simone Meier April 7 (Bloomberg) -- Europe’s economy unexpectedly stagnated in the fourth quarter as companies cut spending more than previously estimated. Gross domestic product in the 16-nation euro region remained unchanged compared with the third quarter, when it rose 0.4 percent, the European Union’s statistics office in Luxembourg said today. It had previously reported a fourth- quarter expansion of 0.1 percent. Corporate investment dropped 1.3 percent instead of 0.8 percent estimated earlier. The European economy is now showing signs of rebounding from its end-of-year relapse as the global recovery prompts companies to step up investment and offsets concerns that Greece’s fiscal crisis will hurt the euro region. While unemployment is at an 11-year high, economic confidence improved in March and the region’s services and manufacturing growth accelerated to the fastest pace since August 2007. Europe will see “a slow and bumpy recovery,” said Colin Ellis, an economist at Daiwa Capital Markets Europe Ltd. in London. “The euro area is set to rely disproportionally on trade this year and next.” Euro-area exports rose 1.9 percent in the fourth quarter from the previous three months, more than the 1.7 percent gain estimated earlier, today’s report showed. Household consumption remained unchanged in the latest quarter, and government spending declined 0.1 percent after rising 0.7 percent in the previous three months. Benchmark Bond The euro was little changed after the GDP release, trading at $1.3384 at 11:46 a.m. in Frankfurt, down 0.1 percent on the day. The yield on the German 10-year benchmark bond dropped 0.2 basis points to 3.12 percent. From a year earlier, euro-area GDP declined a seasonally adjusted 2.2 percent in the fourth quarter instead of a previously reported 2.1 percent, the statistics office said. For the full year, the economy contracted 4.1 percent after expanding 0.6 percent in 2008. Germany, France and Italy, the euro area’s three largest economies, probably expanded 0.9 percent in the first three months of 2010 and may grow 1.9 percent in the current quarter, the Organization for Economic Cooperation and Development said today. The U.S. economy probably grew 2.4 percent in the first quarter, the Paris-based OECD estimates. Euro-area producer prices dropped 0.5 percent in February from a year earlier after declining 1.1 percent in January, a separate report showed today. In the month, prices rose 0.1 percent, the statistics office said. The European Central Bank will probably keep its benchmark interest rate at a record low 1 percent tomorrow, according to all 62 economists in a Bloomberg News survey. The ECB, which has started to phase out some of the stimulus measures introduced to fight the recession, will announce its decision at 1:45 p.m. in Frankfurt. To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

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