Euro zone economic growth may rebound more strongly than expected this year, the European Commission said today.
The forecast came as data showed a drop in consumer demand, and strong imports were behind weak growth at the end of 2005.
The European Union's executive arm forecast quarterly gross domestic product growth in the first three quarters of this year at 0.4 to 0.9 per cent, raising slightly its previous projection for the first three months of 2006.
Data from the EU's statistics office confirmed that growth in the 12 countries using the euro halved to 0.3 per cent on a quarterly basis in the last three months of 2005 due to a drop in household consumption and strong imports.
The weak fourth quarter growth, first reported in February, clashes with upbeat business survey data, putting a question mark over the strength of the recovery. Economists were concerned that some of the survey strength may have come from a build-up of inventories seen in the fourth quarter.
But economists said the February purchasing managers' index (PMI) for the euro zone on Friday confirmed the upswing, backing a 2006 growth forecast increase by the European Central Bank yesterday to 2.1 per cent from 1.9 per cent.
The composite PMI, combining data from the manufacturing and services sectors, which some economists see as the best leading indicator for euro zone growth, rose strongly again in February to its highest level since September 2000.
