Euro growth strong, but set to slow

Wednesday 06 October 2010 11.58
Euro zone economy - Household spending added less to growth than thought
Euro zone economy - Household spending added less to growth than thought

Official figures show that euro zone growth rates jumped in the second quarter of this year, but consumer demand contributed less than expected to the rebound.

Gross domestic product in the euro area grew by 1% from the first quarter, its fastest pace in four years, EU statistics agency Eurostat said. This led to an annual growth rate of 1.9%. The data confirmed preliminary estimates and were in line with expectations.

Crisis-hit Greece was the only euro zone country to suffer a fall in economic output, though the recent figures for Ireland were not included. Germany, the euro zone's biggest economy, helped lift the overall figure, recording 2.2% quarterly growth.

In the United States and Japan, economies grew by 0.4% in the same period.

Eurostat said household consumption contributed less than thought to euro zone growth - 0.1 percentage points compared with 0.3 points reported previously. Analysts say strong private demand is needed to make growth self-sustaining, but high unemployment is expected to prevent any strong rebound in consumer spending.

Economists expect euro zone growth to slow in the third and fourth quarters of the year as austerity measures ordered by many governments to tackle huge debt burdens begin to bite, while exports to China and the US are expected to slow.