The euro zone clocked its fastest growth since the heady days of the dot.com boom in the second quarter as powerhouses France and Germany enjoyed a burst of strength, according to the latest official EU data today.
The 12 nation euro zone saw its growth reach 0.9% in the second quarter, the strongest rate since the second quarter of 2000, the European Union's Eurostat data agency said in a first estimate.
The figure, which compared with 0.6% in the first quarter, also beat forecasts from private economists for growth of 0.7% and a European Commission prediction of 0.4-0.8%. Usually the laggard among major economies, the euro zone dashed ahead of both the US and Japan, which saw growth in the second quarter of 0.6% and 0.2% respectively.
Analysts said the data added weight to arguments for the European Central Bank to keep raising interest rates.
On a 12-month basis, the euro zone booked growth of 2.4%, the strongest rate since the first quarter of 2001 and up from 2% in the first quarter. Eurostat is scheduled to update the figures with more data on August 31 and then again on October 11.
The economy of the 25-nation European Union also expanded 0.9% in the second quarter and 2.6% over one year.
Germany, the biggest-economy in the euro zone, underpinned the region's second-quarter performance with growth of 0.9% over one quarter, the fastest rate since the first three months of 2001. However, growth was even stronger in France, the euro zone's second-biggest economy, which saw quarterly growth of 1.2%.
The region's smaller economies also saw firm growth with the Netherlands reporting a quarterly expansion of 1% and Spain reporting 0.9%. However, Italy, the third-biggest economy in the euro zone, was a weak spot with quarterly growth of only 0.5%.
Looking ahead, the European Commission estimated that euro zone growth would probably start losing steam in the second half of this year, forecasting a rate in a range of 0.5-0.9% for the third quarter, 0.4-0.9% for the fourth quarter and 0.2-0.8% for the first quarter of 2007.
The European Commission forecast in May that the euro zone was set for annual growth this year of 2.1%.
But despite the strong showing in the second quarter, economists identified a number of reasons for an expected slowdown later this year, including a stronger euro, slowing global growth, very high oil prices and higher interest rates.
Despite signs that euro zone growth may have already peaked, some economists said that the robust second-quarter GDP data raised the chances of further increases in euro zone interest rates.
Earlier this month, the European Central Bank bank raised its key interest rate by a quarter of a percentage point to 3%. It was the fourth such increase since December 2005 and the ECB has since reiterated its intention to gradually raise euro zone borrowing costs to keep area-wide inflation in check.
