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Economy in Brief


by Carol Stone EA-13 Growth 0.6% in Q1; Inventories and Fixed Investment Drive Gain June 1, 2007

GDP in Europe -- the EA-13 -- expanded by 0.6% in Q1 at a quarterly rate in chained prices, the same as estimated by Eurostat in its "flash" estimate published on May 15 and described here by Louise Curley. This compounds to 2.4% at an annual rate, nearly four times the growth in the US for Q1. On a year-over-year basis, EA-13 growth was 2.97%, down modestly from Q4's 3.30%.

Today's European report is the first release of expenditure and industry components for the period. The greatest demand increase was in fixed capital formation, which grew 2.5% (quarterly rate) from Q4. A swing in inventories also added considerably to Q1 growth. The available nominal data show the change in inventories was -€1.7 billion in Q4, but +€14.1 billion in Q1. Thus, in chained prices, gross capital formation had decreased in Q4 by 0.6%, but surged by a substantial 4.8% in Q1. For comparison, without inventories, gross fixed capital formation rose 1.5% in Q4 and, as noted, 2.5% in Q1. Private consumption, however, decreased 0.1% in Q1, following a 0.4% increase in Q4. The net export balance decreased as imports rose 1.6% while exports expanded only 0.3%.

Among industries, gross value added in the industrial sector had the most notable acceleration, from 0.6% growth in Q4 to 1.1% in Q1. Construction picked up from 1.5% growth in Q4 to 1.9%. Agriculture contracted by 1.7% following a gain of 2.3% and there were modest pick-ups in the trade and finance sectors.

So the European economy remains generally strong, with the year-to-year growth averaging 2.8% over the past five quarters, the best sustained performance since the tech-bust in 2000/2001. For the broader European Union, EU27, the year-on-year gain was 3.2%, putting the last five quarters right at 3.0%. For Q1 alone, the EU27 expanded by 0.6%, the same as the EA-13. All of these data are in Haver's EUROSTAT database.

EA-13 (Chained 2000 Euros, SA) Q1 2007* Q4 2006* Q3 2006* Q1 2006** 2006 2005 2004
Real GDP (Bil.EUR, % Chg) 1889.8 1878.5 1862.4 1834.2 7422.5 7224.6 7118.2
0.6 0.9 0.6 3.0 2.7 1.5 2.0
Private Consumption -0.1 0.4 0.7 1.4 1.7 1.5 1.5
Gross Capital Formation 4.8 -0.6 1.4 8.3 5.3 2.7 3.5
Gross Fixed Capital Formation 2.5 1.5 1.0 7.8 4.9 2.6 2.3
               
GVA: Industry 1.1 0.6 1.0 3.2 3.8 1.1 1.8
Construction 1.9 1.5 1.2 8.3 4.4 1.5 0.8
Finance & Real Estate 0.9 0.7 0.4 2.9 2.6 2.2 1.8
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