UPDATE 1-Euro zone Q2 GDP jumps on households, investment

* Euro zone Q1 growth revised up to 0.3 pct q/q, 0.8 pct y/y

* Growth seen slowing in H2

* Euro zone PPI 0.2 pct m/m, 4.0 pct y/y

(Adds details, economists’ quotes)

By Jan Strupczewski

BRUSSELS, Sept 2 (BestGrowthStock) – Higher household spending and
investment drove euro zone growth in the second quarter of 2010,
while first quarter growth was also stronger than thought, but
the expansion should slow in the second half of the year.

European Union statistics agency Eurostat confirmed on
Thursday that gross domestic product in the 16-nation currency
area grew 1.0 percent quarter-on-quarter in the April-June
period, the fastest pace in four years, after an upwardly
revised 0.3 percent in the first quarter.

“Today’s data signalled that the euro zone recovery
strengthened in the second quarter of 2010,” said Clemente de
Lucia, economist at BNP Paribas.

Growth was driven by very strong figures in Germany, the
currency area’s biggest economy. Crisis-hit Greece was the only
euro zone country to suffer contraction, although figures for
Ireland were not available.

“Activity will probably lose momentum in the second half of
the year,” de Lucia said, pointing to a likely deceleration of
growth in Germany, where activity largely relies on exports.
Major export markets like China and the U.S. are slowing down.

Year-on-year, the euro zone economy expanded 1.9 percent in
the second quarter, rather than the previously estimated 1.7
percent, and grew 0.8 percent in the first quarter rather than
the earlier reported 0.6 percent.

In the United States, the economy grew 0.4 percent in the
same period and growth was 0.1 percent in Japan.

Eurostat said quarter-on-quarter household consumption
contributed 0.3 percentage points to the overall growth figure,
investment another 0.3 points, government spending 0.1 points
and investories 0.2 points. Net trade added 0.1 points.

For a breakdown of euro zone GDP see:


“The second quarter’s rise in household spending will have
been partly down to households in parts of the periphery
bringing forward spending in advance of July’s VAT hikes,” said
Ben May, economist at Capital Economics.

“Meanwhile, investment will have been boosted by a large
weather-related rebound in construction activity,” he said.

For a full breakdown of the figures, please click on:

With some of the factors that boosted the second quarter
petering out in the next three months, and slower external
demand and fiscal austrity measures to win back market
confidence in euro zone public finances also restraining
activity, economists expect growth to slow later this year.

Some analysts said quarterly expansion could be 0.4-0.6
percent in the July-September period and even less in the last
three months of the year, but noted a dip into contraction was

“This torrid pace of GDP growth is not sustainable, and all
demand components are going to show considerably less momentum
going forward,” said Marco Valli, economist at Unicredit.

“In our projections… the 2010 average should be 1.6
percent, while for 2011 we see 1.3 percent. We expect the
Eureopan Central Bank to come up with similar numbers today,”
Valli said.

The European Central Bank is expected to extend its
liquidity safety-net on Thursday, delaying its exit from crisis
support as policymakers confront a lopsided euro zone recovery
and vulnerable banks in perimeter countries. [ID:nLDE6810DM]

It will also issue new economic forecasts.

Separately, Eurostat said euro zone industrial producer
prices increased by 0.2 percent month-on-month in August for an
annual gain of 4.0 percent, boosted mainly by costs of energy,
which were low in the same period of 2009.

For a full breakdown of the figures, please click on:

(Reporting by Marcin Grajewski and Jan Strupczewski, editing
by Luke Baker)

UPDATE 1-Euro zone Q2 GDP jumps on households, investment