Eurozone growth ended 2006 strongly, thanks to better-than-expected growth in Germany and recovery in Italy. Gross domestic product across the 13 countries that use the euro grew 0.9% between October and December, compared with the previous three months.
The EU statistics office, Eurostat, says growth for the whole of 2006 was 2.7%, compared with 1.4% in 2005. This was higher than market expectations, 2.6%, but lower than United States 3.4%. GDP grew 0.9% between October and December, while the figure for July to September was revised from 0.6% to 0.8%. The EU Federal Statistics Office revised its growth figure upwards for the whole of 2006, from 2.5% to 2.7%. The agency said foreign trade made up an unusually large share of growth in the last three months of 2006. Domestic demand was also strong at the end of 2006. One of the top contributors to European growth was the bloc's biggest economy, Germany. Apparently this was in anticipation of the VAT hike which was increased from 16 to 19%, beginning January. Another surprise increase came in Italy, where three-month growth hit 1.1%, way ahead of expectations. A big contributor to growth was increasing foreign demand for Italian goods, combined with slowing imports. The French economy also grew slightly faster than expected. France's statistics office reported growth between 0.6% and 0.7% in the last quarter of 2006, after the economy had ground to a halt in the previous three months. However the encouraging figures will help consolidate fears of a March interest rate rise from the European Central Bank. The Euro zone is forecasted to expand between 0.4 and 0.8% in the first quarter and 0.4 to 0.9% in the second quarter.