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Last Updated: Thursday, 11 May 2006, 10:20 GMT 11:20 UK
Eurozone growth picking up pace
Shoppers walk past a bakery
Consumers make up the biggest part of the eurozone economy
Growth in the 12 nations sharing the single European currency has picked up in the first three months of this year.

First-quarter growth was 0.6% up on the previous three months, EU statistics body Eurostat said, and was 2% higher than the same period in 2005.

Analysts said that the figures pointed to a continuing recovery that could well prompt the European Central Bank (ECB) to raise interest rates in June.

However, further growth depended on increased consumer spending, they said.

Quicker pace

"Consumer spending seems to have remained relatively muted overall, despite some reported improvement in Germany," said Howard Archer, chief European economist at research firm Global Insight.

"Going forward it is vitally important that consumer spending increasingly kicks in if the Eurozone upturn is to be extended and broadened."

Mr Archer said he expected the ECB to raise rates by a quarter of a percentage point in both June and August, taking its benchmark borrowing cost to 3%.

Earlier this week, the European Commission raised growth forecasts for the eurozone to 2.1% this year from 1.9% in 2005, citing investment, a pick up in consumer demand in Germany and an improving global business environment.

It also said the economy of the European Union would expanded by 2.3% this year from 1.6% in 2005.

However, the volatility of the figures was highlighted on Thursday when a report from Germany, the biggest economy in the eurozone, showed that growth in the first quarter was a less-than-forecast 0.4%.

Analysts cited the effect of high fuel, crude oil and energy prices as a main concern and said that should the problems continue then estimates may well need to be scaled back.


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