Rapid euro zone growth unlikely to last

The euro zone economy expanded at its fastest rate since early 2001 in the first three months of this year as robust growth in…

The euro zone economy expanded at its fastest rate since early 2001 in the first three months of this year as robust growth in the US and Asia fuelled heavy demand for European exports.

But economists said they doubted the recovery momentum was sustainable, given the continuing weakness of consumer demand in the 12-nation bloc and signs that global growth may be peaking.

Eurostat, the European Union's statistical agency, said the region's economy grew at a quarter-on-quarter rate of 0.6 per cent in the first three months, and by 1.3 per cent from a year earlier.

The figures mark a significant rebound for the euro zone after three years of dismal growth. But it still lags well behind other important economies such as the US, which grew almost 5 per cent year-on-year in the first quarter.

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The European Commission said the recovery should gather steam over the course of the year and forecast growth of 0.3-0.7 per cent in the second quarter and 0.4-0.8 per cent in the third.

European Central Bank policymakers said the data supported their view that a gradual recovery was gaining pace. "All the information ... is confirming we are right in our assessment," said Mr Jean-Claude Trichet, ECB president. Data in recent days has shown German gross domestic product rising a stronger-than-expected 0.4 per cent in the first quarter, France growing by 0.8 per cent, Italy by 0.4 per cent and Spain by 0.6 per cent.

But economists said the provisional data, which did not include a detailed breakdown, suggested growth was largely the result of a strong net trade contribution, itself the result of weak import growth.

With oil prices rising above $40 a barrel, the ECB has started to warn that energy costs could fuel inflation just as the recovery takes hold.