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Economy in Brief

First Q1 GDP Releases Show Signs of Life in Europe
by Carol Stone May 11, 2006

GDP growth picked up in the first quarter for the EuroZone and several individual countries.Eurostat reported this morning that GDP in the EuroZone grew 0.6% over Q4 following 0.3% in that period. The year/year gain was 2.0% from Q1 2005. This is the best since Q2 2004.

No details are presented in this "flash" estimate, but totals for several constituent countries are available. Germany reported growth of 0.4% in Q1 after no change in Q4. Its yearly growth rate was 1.4%. The German Federal Statistics Office described that a rebound in consumption was the spur to Q1 growth, after its outright decline in Q4. The data for this and other components will be released May 23.

Similarly, Italy's growth bounced by 0.6% after its flat performance in Q4. This produced a 1.5% gain from Q1 2005, the largest increase since Q2 2001. In Spain, growth has been on a much firmer track generally, and it actually ticked down in Q1 to 0.8% from 0.9% in Q4. This still, however, maintained the recent 3.5% year/year pace.

Growth slowed in the Netherlands, to 0.2% from 0.6% in Q4; however, the last three quarters were all at a moderately firm rate, yielding year-on-year growth of 2.1% in Q1, one of the strongest yearly increases since the late 1990s boom period.

The improvements in most of these growth rates seem to confirm the EC Commission's optimism in its latest forecast issued Monday and discussed here by Louise Curley. The Commission raised its outlook for the EuroZone12 by 0.2 percentage points to 2.3% for the year 2006. In the actual Q1 data reported today, perhaps the most important single factor is the gain in Germany; we await the specific figures for private consumption on May 23, but increased spending by the people of Europe's largest nation has to be a help to the entire region. It is all the more significant in light of the accelerating cost of energy.

GDP Q1 2006 Q4 2005 Q3 2005 Q1 2005 2005 2004 2003
EU - Flash 0.6 0.3 0.7 2.0 1.4 1.8 0.7
Germany 0.4 0.0 0.6 1.4 1.2 1.1 -0.2
Italy 0.6 -0.0 0.3 1.5 0.1 0.9 0.1
Spain 0.8 0.9 0.9 3.5 3.4 3.1 3.0
Netherlands 0.2 0.6 0.7 2.1 1.1 1.7 -0.1
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