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Last Updated: Tuesday, 13 February 2007, 10:35 GMT
Eurozone sees revival in growth
Jean-Claude Trichet
Strong growth will not dampen expectations of a March rate rise
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.

The figures will do nothing to dampen expectations of a March interest rate rise from the European Central Bank.

Strong German growth

Volkswagen workers put finishing touches to a Bentley at its Dresden factory
Exports made an unusually strong contribution to growth

One of the top contributors to European growth was the bloc's biggest economy, Germany.

Gross domestic product grew 0.9% between October and December, while the figure for July to September was revised from 0.6% to 0.8%.

The 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.

"The economy was certainly largely boosted by consumption ahead of the VAT hike," according to Frederique Cerisier from BNP Paribas.

German sales tax was increased from 16% to 19% at the beginning of January.

Italian recovery

Another surprise increase came in Italy, where three-month growth hit 1.1%, way ahead of expectations.

"The number was a clear surprise, I was expecting growth of around 0.3% and we are much higher than that," Annalisa Piazza of Cube Financial said.

A big contributor to growth was increasing foreign demand for Italian goods, combined with slowing imports.

French economy restarts

The French economy also grew slightly faster than expected.

The national statistics office, INSEE, 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.

The figures dragged growth for the full year up to 2.0%, which was at the bottom end of the government's projections.


SEE ALSO
Eurozone rates unchanged at 3.5%
08 Feb 07 |  Business
German exports surge to new high
08 Feb 07 |  Business
Merkel cheers Germany's recovery
21 Aug 06 |  Business
VAT rise hits German confidence
25 Jan 07 |  Business

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