Eurozone grows at fastest rate in three years
By Tony Major in Frankfurt
Published: May 14 2004 10:39 | Last Updated: May 14 2004 17:36
The eurozone economy expanded at its fastest rate since early 2001 in the first three months of this year as robust growth in the US and Asia fuelled heavy demand for European exports.
But economists said they doubted the recovery momentum was sustainable, given the continuing weakness of consumer demand in the 12-nation bloc and signs that global growth may be peaking.
Eurostat, the European Union's statistical agency, said the region's economy grew at a quarter-on-quarter rate of 0.6 per cent in the first three months, and by 1.3 per cent from a year earlier.
The figures mark a significant rebound for the eurozone after three years of dismal growth. But it still lags well behind other important economies such as the US, which grew almost 5 per cent year-on-year in the first quarter.
The European Commission said the recovery should gather steam over the course of the year and forecast growth of 0.3-0.7 per cent in the second quarter and 0.4-0.8 per cent in the third.
European Central Bank policymakers said the data supported their view that a gradual recovery was gaining pace. "All the information. . . is confirming we are right in our assessment," said Jean-Claude Trichet, ECB president.
Data in recent days have shown German gross domestic product rising a stronger- than-expected 0.4 per cent in the first quarter, France growing 0.8 per cent, Italy by 0.4 per cent and Spain by 0.6 per cent.
But economists said the provisional data, which did not include a detailed breakdown, suggested growth was largely the result of a strong net trade contribution, itself the result of weak import growth.
"Exports are robust because of strong global demand. . . that's good news," said Ken Wattret of BNP Paribas. But the data also reflect weak imports which are "in turn a result of weak domestic demand".
"For a sustained improvement, domestic demand needs to take off too," said Julien Seetharamdoo of Capital Economics. "As such, it is too early to say that this is the start of a strong recovery." Markus Heider of Deutsche Bank said there was a risk the second half could be weaker than the first, as global growth was "probably past its peak".
Domestic demand might also weaken if oil prices drive up inflation.
With oil prices rising above $40 a barrel, the ECB has started to warn that energy costs could fuel inflation just as the recovery takes firmer hold.
At its last meeting in Helsinki the bank struck a more hawkish tone on interest rates.
But economists think that with consumption fragile and labour markets still weak, the ECB will remain wary of tightening its monetary policy too soon. Most expect rates to be kept on hold for some time. |
