Euro boosted by signs of upturn on the Continent

FRESH SIGNS of recovery inmainland Europe helped boost the euro on the foreign exchanges yesterday.

A surge in French household purchases of clothes and appliances took total consumer spending 2.1 per cent higher last month. The figures followed other signs that the second biggest economy in Euroland is starting to emerge from its slowdown.

With evidence from Germany suggesting that it is also on the path to recovery, and fears that growth in the US will slow down, the danger of the euro falling to parity with the dollar has receded. Mark Cliffe, chief economist at ING Barings, said: "The euro will recover with the narrowing in the growth gap between the US and Euroland." He added: "Clearly a lot of people have been looking for it to fail and have rather ignored the signs of strength in Euroland."

US figures yesterday showed growth was even stronger than first estimates in the first quarter, with GDP rising at an annualised 4.3 per cent. News of the biggest increase in corporate profits in four years took Wall Street higher. But analysts now firmly expect the Federal Reserve to raise US interest rates as early as next week to slow down the roaring American economy.

At $1.0447, the euro was close to its recent high against the dollar yesterday. The currency also remained above 65p against sterling, which has weakened on new hopes of additional interest rate cuts.

The latest estimate of UK GDP showed no growth in the first quarter but the year-on-year growth rate was revised up a shade to 0.7 per cent due to an increased estimate of growth in transport services. Consumer and Government spending made the strongest contributions to growth.

Earlier in the week, Hans Tietmeyer, the Bundesbank president, helped boost the euro with upbeat comments on Germany's prospects. "The picture on the German economy is still a mixed one, but there are increasingly positive signs," he said.

The latest official statistics showed French consumers increased their spending on goods by 2.1 per cent in May, taking the year-on-year growth to 4.7 per cent. The monthly changes are volatile, but the underlying trend is pointing firmly upwards. Spending on clothing jumped 7 per cent after a 3.3 per cent fall in April. Spending on household goods rose 2.3 per cent in the month and 10.6 per cent in the year to May.

In addition, French consumer prices were unchanged in May, and 0.4 per cent lower than a year earlier. Other figures yesterday showed a 0.6 increase in hourly wages in the first quarter, taking annual pay growth to 2 per cent.

The combination of no inflation, slowly falling unemployment and rising earnings has boosted household incomes in real terms. The latest statistics from France and Germany have fuelled hopes that growth in Euroland is picking up after a dismal winter.

Eurostat, the EU statistics agency, reported a 0.7 per cent fall in EU industrial output in April, but the biggest drop was in the UK. "We are quite hopeful that in the second half of this year the industrial recovery will be coming through," said Gwyn Hacche, an economist at HSBC.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones