Growth in the $8.5 trillion economy of the dozen euro nations accelerated to the fastest pace in three years in the first quarter led by exports and consumer spending, the European Union's statistics office said. The economy expanded 0.6 percent from the fourth quarter, when it grew 0.4 percent, the Luxembourg-based Eurostat said in its third estimate. From a year ago, the region's economy expanded 1.3 percent.
``The outlook is actually quite good with industrial production picking up and confidence indicators are looking up too,'' said Jan Amrit Poser and economist with Bank Sarasin & Cie. ``It's a sluggish recovery, but a steady recovery.'' U.S. and Asian-led global growth has boosted demand for the region's goods, helping the euro economy recover from last year's slowest pace of growth in decade. It has so far failed to boost hiring, with unemployment stuck at 9 percent, the highest in more than four years. That has limited the increase in consumer spending, particularly in Germany, Europe's largest economy.
The European Commission today cut its forecast for the current three-month period, saying growth will be between 0.3 percent and 0.7 percent compared with 0.4 percent to 0.8 percent it predicted on June 1. The commission left its estimate for second-quarter expansion at 0.3 percent to 0.7 percent.
Consumer Demand
The International Monetary Fund expects the euro region's economy to lag growth in the U.S. and Japan. In April, the IMF said the economy of euro nations will grow 1.7 percent this year compared with 4.6 percent in the U.S. and Japan's 3.4 percent. The strength of the recovery has been mixed within the euro region. France, the second-largest of the 12 euro economies, led way, expanding 0.8 percent from the previous quarter as consumer spending increased. By contrast, Germany's 0.4 percent growth relied solely on exports.
In the euro nations as a whole, consumer spending increased 0.6 percent and exports gained 1.5 percent, today's report showed. Government spending declined 0.2 percent and investment growth slowed to 0.2 percent from 0.8 percent in the fourth quarter. Exports growth may slow in coming months amid signs the recovery in the U.S. may have peaked. U.S. employers added 112,000 workers in June, less than half of what economists surveyed by Bloomberg News had forecast. An index of growth for Chicago-area manufacturers and other businesses declined that month after reaching a 16-year high.
`Gentle Recovery'
``We're seeing a gentle recovery, but not at all the long- awaited big recovery,'' said Bart Gonnissen, chief financial officer of Carestel NV, Belgium's an operator of roadside and airport restaurants. ``Things will probably start to slow down again towards the spring of 2005.'' The European Central Bank said it expects the recovery to continue, with the conditions are in place for consumer spending to pick up in the dozen euro nations. That, coupled with a strengthening global economy, should help the region's economy grow about 1.7 percent this year and 2.2 percent in 2005, after expanding 0.4 percent last year, the ECB said. The ECB hasn't raised interest rates since June, when it cut its benchmark rate to 2 percent, the lowest in any euro country for six decades, declining to follow the U.S. Federal Reserve's quarter-point increase. Officials will meet early next month to decide rates. ///www.bloomberg.com