LDN - Business

Higher consumer spending underpins euro zone strong growth

[September 07, 2017] By Francesco Guarascio

BRUSSELS (Reuters) - The euro zone economy grew at a robust pace in the three months to June, driven mostly by higher domestic demand and investment, official data released on Thursday confirmed.

The European statistics office Eurostat said the euro zone's expansion picked up speed in the second quarter, with the economy growing 0.6 percent compared with the previous three months. That was in line with previous estimates and market expectations and up from a 0.5 percent rise in January-March.

The acceleration was driven by growing consumer spending and investment, with the economy shrugging off slower export growth as a result of the strong euro <EUR=>.

Household consumption went up by 0.5 percent in the second quarter from 0.4 percent in the first three months of the year, and imports more than doubled their growth rate to 0.9 percent from 0.4 percent.

Government expenditure also accelerated to 0.5 percent from 0.2 percent.

Higher consumer confidence and demand drove up investment, which expanded by 0.9 percent after a 0.3 percent contraction in the previous quarter.

Hit by the stronger euro, which is up around 13 percent against the dollar this year, exports slowed their growth to 1.1 percent from 1.3 percent in the previous quarter.

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A woman is seen in an Ikea shop in a mall in Rome, Italy, May 19, 2017. REUTERS/Max Rossi

Eurostat also revised upwards the data on euro zone growth on a yearly basis. The bloc's gross domestic product (GDP) expanded by 2.3 percent in the second quarter and by 2.0 percent in the first three months of the year, higher than previous estimates of 2.2 percent and 1.9 percent respectively.

The yearly figure for the second quarter was also higher than the average forecast of economists polled by Reuters who had expected a 2.2 percent rise on the year.

The Eurostat reading came as European Central Bank policymakers met in Frankfurt. Their interest rate decisions are to be announced at 1145 GMT, followed by ECB President Mario Draghi's news conference at 1230 GMT.

The GDP growth and its domestic component confirm the healthy state of the bloc's economy, positive news for the ECB which could start preparing the ground for a reduction of its monetary stimulus, even though inflation remains below target.

(Reporting By Francesco Guarascio; Editing by Philip Blenkinsop and Catherine Evans)

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