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Economy in Brief

European Commission Predicts Strong GDP Growth in the Euro Zone to Continue
by Louise Curley August 14, 2006

As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst's expectations of good growth in Europe in the second quarter. Today's reports for Spain and Germany reinforced this view. Both Spain and Germany reported growth of 0.9% for the second quarter.

By now Eurostat has enough data from the various countries to issue Flash Estimates for the Euro Zone, as a whole, and for the 25 members of the European Union. Flash Estimates of GDP growth have been available from the second quarter of 2002 to date for the Euro Zone and from the second quarter of 2003 for the Euro 25. The Flash Estimates of Growth for the two areas are shown in the first chart.

Growth for the entire Euro Zone is now estimated at 0.9% up from 0.6% in the first quarter. At an annual rate of increase, the measure used in the United States%, Euro Zone growth was 3.6% in the second quarter, compared with the seasonally adjusted annual rate of 2.5% for the U. S. Growth of GDP in the Euro Zone and in the U. S. are compared in the second chart.

The Euro 25 are also estimated to have grown 0.9% in the second quarter compared with 0.7% in the first quarter.. (In addition to the 12 countries of the Euro Zone, the Euro 25 includes, the U. K., Sweden, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Czech Republic, Slovakia, Slovenia, Cyprus and Malta.)

Also published today were The European Commission's forecasts of the Euro Zone's rate of growth for the next three quarters. On the basis of their dynamic factor model for quarterly GDP growth the Commission forecasts a range of GDP growth in the third quarter of 0.5% to 0.9%, in the fourth quarter, 0.4% to 0.9% and in the first quarter of 2007, 0.2% to 0.8%.

Quarter-to-Quarter Change in GDP Q1  06 Q2 06 -- 2005 2004 2003
Germany  0.7 0.9 -- 1.16 1.10 -0.19
Spain 0.8 0.9 -- 3.43 3.09 3.00
Euro Zone 0.6 0.9 -- 1.40 1.33 0.79
EU 25 0.7 0.9 -- 1.69 2.26 1.27
Euro Zone Forecast Q3 06 Q4 06 Q1 07 -- -- --
High 0.9 0.9 0.8 -- -- --
Low 0.5 0.4 0.2 -- -- --
Average 0.7 0.65 0.5 -- -- --
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