Euro area grows 2,5 per cent

BRUSSELS – Lower industry output hurt European economic growth in the second quarter after a growth spurt earlier in the year, with the 13 nations that use the euro expanding by 2,5 per cent, the European Union said yesterday.

The industry slowdown in the spring came after Europe’s stellar year in 2006, when it finally boosted domestic demand and added jobs after years of little growth, lifted by a rising tide of exports to the booming world economy. Germany, the EU’s largest economy and the world’s biggest exporter, grew a disappointing 2,5 per cent from last year and only an 0,3 per cent increase from the previous quarter.The euro area results compared to growth of 3,1 per cent year-on-year in the first quarter.For the entire 27-nation EU, growth came to 2,8 per cent in the second quarter, slipping from 3,3 per cent in the first three months of the year.The second-quarter figures from the EU’s statistical agency Eurostat must still be confirmed because it does not yet have figures from all EU economies.Worse-than-expected growth was the result of a stream of surprises from large EU countries that posted poor figures likely caused by seasonal factors that saw builders work through a mild winter – meaning fewer orders in the spring – and shoppers postpone usual seasonal purchases, UniCredit economist Aurelio Maccario said.UPWARD REVISION He forecast a rebound in the third quarter and a possible upward revision of Tuesday’s figures, saying he was convinced that recent market jitters rather than a “lagging indicator affected by one-off factors” would have more influence over the European Central Bank’s decision next month whether to raise interest rates.”Today’s number is the lowest outcome since the fourth quarter of 2004, it comes at a time when markets remain shaky and focused on financial tensions linked with the subprime crisis, and will reinforce the case for the ECB to stay put at the next meeting,” he said in an analysts’ note.Germany’s performance was the weakest since the last quarter of 2005, when the economy also grew by 0,3 per cent, and was below the 0,4 per cent forecast of analysts surveyed by Dow Jones Newswires.The Federal Statistics Office said construction investment was weakening and the economy was relying more on “very dynamic” exports than demand at home.The persistent strength of the euro – which has hovered near record highs against the US dollar – carries the risk of European exports becoming more expensive and less competitive, particularly to its largest trading partner, the United States.EU and European Central Bank officials have insisted that Europe is not yet hurting from its high-value currency.GROWTH FORECAST But the European Commission lowered its growth forecasts for the next three quarters, predicting that quarter-on-quarter growth in the third quarter would be between 0,3 and 0,8 per cent, or a mid-point of 0,55 per cent.It set a slightly lower range for the fourth quarter, predicting growth between 0,2 per cent and 0,8 percent, or a target of 0,5 per cent.The first three months of next year should see the economy expand between 0,2 and 0,9 per cent, it said.France grew a feeble 1,3 per cent in the second quarter, seeing a modest increase of 0,3 per cent from the previous quarter that was far less than a forecast of 0,5 per cent.It followed softer industrial output figures last week.Britain and Spain each expanded 0,8 per cent from the previous quarter, with British gross domestic product growth coming in at three per cent from the second quarter of 2006 and Spain’s expansion slowing to four per cent year-on-year from an annual rate of 4,1 per cent in the first quarter.The Spanish National Statistics Institute blamed lower domestic demand.The highest growth figures come from the tiny but rapidly growing Baltic nations that joined the EU in 2004.Latvia bloomed by 11,3 per cent from the second quarter last year and Lithuania was up 7,7 per cent.The Greek economy, however, contracted during the quarter, reporting an 0,8 per cent decrease from the first three months of the year.Italy barely grew at all with quarterly growth of 0,1 per cent.Nampa-APeconGermany, the EU’s largest economy and the world’s biggest exporter, grew a disappointing 2,5 per cent from last year and only an 0,3 per cent increase from the previous quarter.The euro area results compared to growth of 3,1 per cent year-on-year in the first quarter.For the entire 27-nation EU, growth came to 2,8 per cent in the second quarter, slipping from 3,3 per cent in the first three months of the year.The second-quarter figures from the EU’s statistical agency Eurostat must still be confirmed because it does not yet have figures from all EU economies.Worse-than-expected growth was the result of a stream of surprises from large EU countries that posted poor figures likely caused by seasonal factors that saw builders work through a mild winter – meaning fewer orders in the spring – and shoppers postpone usual seasonal purchases, UniCredit economist Aurelio Maccario said.UPWARD REVISION He forecast a rebound in the third quarter and a possible upward revision of Tuesday’s figures, saying he was convinced that recent market jitters rather than a “lagging indicator affected by one-off factors” would have more influence over the European Central Bank’s decision next month whether to raise interest rates.”Today’s number is the lowest outcome since the fourth quarter of 2004, it comes at a time when markets remain shaky and focused on financial tensions linked with the subprime crisis, and will reinforce the case for the ECB to stay put at the next meeting,” he said in an analysts’ note.Germany’s performance was the weakest since the last quarter of 2005, when the economy also grew by 0,3 per cent, and was below the 0,4 per cent forecast of analysts surveyed by Dow Jones Newswires.The Federal Statistics Office said construction investment was weakening and the economy was relying more on “very dynamic” exports than demand at home.The persistent strength of the euro – which has hovered near record highs against the US dollar – carries the risk of European exports becoming more expensive and less competitive, particularly to its largest trading partner, the United States.EU and European Central Bank officials have insisted that Europe is not yet hurting from its high-value currency. GROWTH FORECAST But the European Commission lowered its growth forecasts for the next three quarters, predicting that quarter-on-quarter growth in the third quarter would be between 0,3 and 0,8 per cent, or a mid-point of 0,55 per cent.It set a slightly lower range for the fourth quarter, predicting growth between 0,2 per cent and 0,8 percent, or a target of 0,5 per cent.The first three months of next year should see the economy expand between 0,2 and 0,9 per cent, it said.France grew a feeble 1,3 per cent in the second quarter, seeing a modest increase of 0,3 per cent from the previous quarter that was far less than a forecast of 0,5 per cent.It followed softer industrial output figures last week.Britain and Spain each expanded 0,8 per cent from the previous quarter, with British gross domestic product growth coming in at three per cent from the second quarter of 2006 and Spain’s expansion slowing to four per cent year-on-year from an annual rate of 4,1 per cent in the first quarter.The Spanish National Statistics Institute blamed lower domestic demand.The highest growth figures come from the tiny but rapidly growing Baltic nations that joined the EU in 2004.Latvia bloomed by 11,3 per cent from the second quarter last year and Lithuania was up 7,7 per cent.The Greek economy, however, contracted during the quarter, reporting an 0,8 per cent decrease from the first three months of the year.Italy barely grew at all with quarterly growth of 0,1 per cent.Nampa-APecon