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To: John Carragher who wrote (9661)	2/15/2001 7:31:26 AM
From: zbyslaw owczarczyk	Read Replies (1) \| Respond to of 14638

Feb. 15 (Bloomberg) -- Italy's economic expansion accelerated in the fourth quarter, lifting the growth rate for 2000 to the highest level in five years, and making a cut in European Central Bank interest rates less likely in coming weeks. Gross domestic product grew 0.8 percent from the previous three-month period, twice the increase predicted by economists, and up from a 0.6 percent gain in the third quarter, statistics office Istat said. GDP grew 2.8 percent in 2000, double the expansion seen in 1999. Europe's economy is ``strong and Italy is no exception,'' said Francesco Trapani, chief executive of luxury-goods maker Bulgari SpA. Bulgari's sales will probably grow about 20 percent this year, he said. The euro zone's third-largest economy, the region's laggard in recent years, was boosted by gains in industrial production and consumer spending. ECB policy makers, who convene today, won't want to lower borrowing costs until there are clear signs of slowing growth in the 12-nation euro region, economists said. ``There's no need to cut rates,'' said Lorenzo Codogno, an economist at Bank of America in London. The ECB could keep the benchmark refinancing rate at the current level of 4.75 percent all year, provided there's no further deterioration in the U.S. economy, he said. The ECB will announce at 1:45 p.m. Frankfurt time whether it has changed borrowing costs. The yield on interest rate futures contracts for March delivery today rose by 3 basis points, to 4.69 percent, just 6 basis points below current three-month interest rates -- suggesting that investors see little chance of a cut in the first quarter. Industrial Production Italian production of goods ranging from machinery to food rose 2.4 percent in December from November, the fastest pace since May, Istat said today. Gains were paced by production of machinery and consumer goods. Other government reports from the euro zone today also showed the region's economy expanding. The Dutch economy, the fifth-largest in the euro region, grew 1.2 percent in the fourth quarter, the fastest pace in a year and up from a 0.7 percent gain in the previous three months. Spanish retail sales rose an annual 3.3 percent in December. Italy and the Netherlands were the first euro zone nations to release fourth-quarter GDP figures. France's GDP release will be on Feb. 23. Germany will follow on March 1. Italy's economy has lagged Germany and France for five straight years. Today's Italian reports are a boon to the ruling coalition of Prime Minister Giuliano Amato, which will probably call a general election in April or May. The government last year introduced $20 billion in corporate- and income-tax cuts to boost economic growth. Germany and France have also announced tax cuts. Opposition Lawmakers Opposition lawmakers played down the reports. Antonio Marzano, a member of parliament and the chief economic adviser to opposition leader Silvio Berlusconi, said in an interview that growth this year is likely to slow to 2.5 percent. The government's forecast if for a 2.9 percent expansion in GDP. Analysts said euro-zone growth is likely to be greater than that of the U.S. in 2001 for the first time in a decade. Most of Italy's exports are sold to other European countries, with only about 10 percent sold in the U.S., limiting Italy's exposure to ebbing U.S. growth. The 10-year-old U.S. economic expansion virtually evaporated in the final weeks of 2000. ``The U.S. slowdown will impact European growth but not too much,'' particularly as the U.S. is likely to rebound in the second half of the year, said Riccardo Perissich, a director at Italy's Pirelli SpA, the world's largest maker of power cables. The U.S. Federal Reserve has already cut borrowing costs twice this year, by a total of 1 percentage point, to jump start the flagging economy. The ECB raised interest rates seven times between November 1999 and October 2000, and futures contracts show that investors expect the central bank to cut for the first time in two years in the second quarter of this year. Capital Goods Economists polled by Bloomberg expected Italian industrial production to increase 0.1 percent in December from November, following a revised 1.1 percent gain in November from October. Capital goods, such as factory machinery, rose a seasonally adjusted 5.8 percent in the month, the biggest gain among the components of the index. Consumer goods rose 3.1 percent. Production rose 13.1 percent from a year earlier, the biggest gain since the current index was introduced in 1996, after advancing a revised 2.4 percent in November. Production rose a workday adjusted 4.8 percent in 2000 from 1999. Final GDP figures will be released March 1. Today's report gave no breakdown, though an Istat spokesman said the gain was boosted by consumer spending and industrial production.