Euro Area Sees Economic And Employment Slowdown

Strong finish to 2006 and slow start to 2007 may be due in part to Germany's January 1st increase in sales tax.

BRUSSELS, Belgium (AP) - Economic growth in the euro area slowed to 3 percent while the EU as a whole expanded by a slower 3.2 percent in the first three months of the year as household spending barely moved, the European Union said Friday.

The jobless rate in the 13 nations that use the euro fell to a new low of 7.1 percent in April, despite the slight slowdown, the statistical agency Eurostat said.

The economic figures come after a strong finish to 2006 that saw gross domestic product grow 3.3 percent in the euro area and 3.5 percent in the EU.

Eurostat's figures point to slower household consumption, saying this decreased slightly - by 0.1 percent - in the euro area and remained unchanged in the entire EU after a strong showing at the end of last year.

This could partly be explained by Germany's decision to increase sales tax on Jan. 1, which saw shoppers make big purchases before the New Year, and closing wallets and purses in early 2007.

However, this looks set to change on the back of surging consumer confidence figures released Thursday that showed consumers were very optimistic about the general economy and their own finances for the year ahead.

So far this year, growth has been reliant on business, particularly investments that expanded strongly as exports rose in both zones during the first quarter.

Economists expect the main driver of expansion to shift to domestic demand this year as the high-value euro and U.S. slowdown start to cut into foreign demand for European goods.

But the economy should still add jobs, cutting jobless rates that are some of the highest seen in the industrialized world.

Unemployment in all 27 countries of the European Union also fell to 7.1 percent. Both the euro zone and the entire EU reported 7.2 percent in March.

The year-on-year rate - which is seasonally adjusted - has been falling steadily to levels not seen since 1993 as the European economy enjoys a strong burst of growth, adding jobs that should cut the number of jobseekers further this year and next year.

Eurostat said that 10.6 million people in the euro area and 16.7 million in the EU were seeking work in April.

Poland reported the highest number of jobseekers at 11.2 percent, with Slovakia close behind at 10.5 percent and France posting a provisional rate of 8.6 percent.

The EU's largest economy, Germany, had a provisional rate of 6.7 percent, Eurostat said. The Netherlands had the lowest unemployment rates of 3.3 percent, followed by Ireland on 4 percent.

There are already signs of better news ahead. In Austria, the employment service said the number of registered unemployed dipped below 200,000 for the first time since 2001 in May.

Eurostat said the largest relative falls over the year were seen in fast-growing EU newcomer states, Estonia, Slovenia and Slovakia.

The number of jobseekers over the year increased in Hungary and Portugal - both countries carrying a high public debt that their governments are trying to contain with public sector spending cuts.

European jobless figures are still far higher than the United States - which reported 4.5 percent in April, and Japan, which posted a rate of 3.8 percent.


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