Euro-zone Q1 growth slows down

The euro-zone economy grew slightly less rapidly in the first quarter than previously estimated, the European Union's statistics agency Eurostat said yesterday.

In its third estimate of gross domestic product in the 15 countries that use the euro during the first three months of this year, it calculated that the economy grew 0.7 per cent from the fourth quarter of 2007, and 2.1 per cent from the first quarter of 2007.

According to its previous estimate, released in early June, the economy grew 0.8 per cent on the quarter and 2.2 per cent on the year.

The downward revision is unlikely to have a major impact on the European Central Bank's future interest rate decisions. Even the lower figure was a strong performance, particularly given rising oil prices, the reduced availability of credit, the euro's strength and slowing demand in some key export markets.

And, Eurostat raised its estimate of growth in the fourth quarter of last year. It now estimates the euro-zone economy grew 0.4 per cent on the quarter and 2.2 per cent on the year, having previously estimated it grew 0.3 per cent on the quarter and 2.2 per cent on the year.

The strong first-quarter performance doesn't appear to have been sustained in the second quarter. Business surveys and economic data suggest that the economy has slowed significantly in the three months from April to June, although policymakers insist there's only a slim chance that it will enter a recession this year.

Speaking to European Union legislators, ECB President Jean-Claude Trichet said inflation in the 15 countries sharing the euro – at the "worrying" level of four per cent in June – risks staying high in the months ahead.

"In the wake of renewed sharp commodities price increases, (inflation) arrived at the worrying levels of around four per cent in mid 2008," Trichet told the European Parliament in Strasbourg.

"Looking ahead, the annual (inflation) rate is likely to remain well above the levels consistent with price stability for sometime, moderating only gradually in 2009," he added.