Euro zone economic growth slows

Quarterly euro zone economic growth almost halved in the last three months of 2007 as household and government consumption contracted…

Quarterly euro zone economic growth almost halved in the last three months of 2007 as household and government consumption contracted, data showed.

The European Union statistics office confirmed its earlier estimate that GDP in the then 13 countries using the euro rose 0.4 per cent quarter-on-quarter in October to December, in line with market expectations.

GDP rose 2.2 per cent year-on-year, slightly off Eurostat's earlier estimate of 2.3 per cent.

Household and government consumption shrank 0.1 per cent in the fourth quarter against the previous three months, making no contribution to growth at all in that period.

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Investment contributed 0.2 percentage point to the overall result, while a change in inventories subtracted 0.1 percentage point.

Eurostat also said producer price inflation in January was 0.8 per cent month-on-month for a year-on-year 4.9 per cent gain.

Producer prices are an indication of future consumer inflation, because unless price hikes at factory gates are absorbed by intermediaries or retailers, they are passed on to consumers.

The jump in producer prices in January was mainly fuelled by energy, which rose 1.4 per cent month-on-month for an annual surge of 10.6 per cent.

Prices of durable and non-durable consumer goods, seen as a proxy for consumer inflation trends, rose 0.8 and 0.5 per cent month-on-month respectively for 2.1 and 4.6 per cent annual gains.

The European Central Bank wants to keep inflation just below 2 per cent over the medium term, but fast-rising food and energy costs have thrown it off target since September last year.