Eurozone growth eases on French setback

14th November 2006, Comments 0 comments

BRUSSELS, Nov 14, 2006 (AFP) - The 12-nation eurozone extended its strongest economic upswing since the turn of the century in the third quarter although growth slowed slightly due to a setback in France, official EU data showed on Tuesday.

BRUSSELS, Nov 14, 2006 (AFP) - The 12-nation eurozone extended its strongest economic upswing since the turn of the century in the third quarter although growth slowed slightly due to a setback in France, official EU data showed on Tuesday.

Economic growth in the 12 nations sharing the euro eased to 2.6 percent over 12 months from 2.7 percent in the previous quarter, according to first estimates by the European Union (EU) Eurostat data agency.

On a quarterly basis, growth eased to 0.5 percent in the third quarter from 0.9 percent in the previous quarter, Eurostat said.

The data fell short of private economists' forecasts that the eurozone economy grew by 0.7 percent in the third quarter and 2.8 percent over 12 months, as polled by the AFX News financial news agency.

Even though growth cooled slightly in the third quarter, the eurozone economy is in the midst of its strongest expansion since the dot.com boom at the beginning of the century, fuelled by solid business investment and firm consumer spending.

"Although eurozone growth slowed more than expected in the third quarter, the overall picture remains healthy," said economist Howard Archer at consultancy Global Insight.

"The third-quarter moderation in growth was clearly substantially a correction from the particularly robust expansion seen in the first half of the year and was dragged down by the surprising stagnation in the French economy," he added.

The French economy, the eurozone's second-biggest economy, stalled in the period, while Italy's economy also gave a weak performance, expanding only 0.3 percent and 1.7 percent over one year.

However, Germany, the biggest economy in the single European currency club, continued to grow at a healthy pace of 0.6 percent from the previous quarter and 2.8 percent over one year.

Meanwhile, the 25-nation EU economy slowed slightly in the third quarter to an annual rate of 2.8 percent from 2.9 percent in the previous quarter while on a quarterly basis growth eased to 0.6 percent from 0.9 percent.

Despite the slowdown, both eurozone and EU growth was stronger than in the United States in the third quarter, when the biggest economy in the world expanded only 0.4 percent and 2.9 percent over one year.

Looking ahead, Global Insight's Archer said that eurozone growth was likely to remain firm and "most of the latest survey evidence and indicators point to ongoing healthy activity in the fourth quarter".

Last week the European Commission forecast that the eurozone economy would grow 2.6 percent in 2006 before slowing to 2.1 percent next year.

Economists widely expect eurozone growth to cool next year due in large part to an increase in value added tax (VAT) n Germany and a slowdown in the bloc's major trading partners.

Bear Stearns economist David Brown said that the slower third-quarter growth could signal that eurozone growth had already passed its peak.

He said that the slower growth "is bound to raise concerns that the eurozone's fledgling recovery may be starting to lose momentum earlier than expected".

Bank of America economist Holger Schmieding was confident that the eurozone economy was not losing steam because "the underlying economic performance is much more robust than today's data releases may indicate". He predicted that the data would be revised higher in later readings.

Copyright: AFP

Subject: French news

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