European Economy. Quarterly report on the euro area 2006.

Abstract

After several years of sluggish performance, the recovery is now on a solid footing in the euro area. Economic growth accelerated to an annualised rate of 3.4 % in the first half of 2006, which was well above expectations and the fastest pace in six years. Underlying this robust pick-up in activity is a significant shift in the relative contributions of external and domestic demand. While external trade remains very supportive, domestic demand has now become the main driver of growth. Following a protracted lean period, private investment has rebounded strongly with both construction and equipment contributing to the momentum. Furthermore, employment growth is accelerating gradually and unemployment is on a clear downward course. Conditions are therefore in place for a recovery in private consumer demand, which has been a particular economic weak spot in recent year