EU Q3 growth stable -- Nice hedge for U.S. slowdown

November 15, 2006

Eurostat reported that the European Union (EU) GDP growth was 2.6% faster in Q3 2006 than Q3 2005, on a par with U.S. Q3 2006 growth of 2.9%. However, EU growth is stable while U.S. growth is slowing. In the EU, Q2 GDP growth was 2.7% while U.S. GDP growth was 3.5%.

The Economic and Monetary Affairs Commission of the European Union reported that GDP growth for the EU region will be 2.8% in 2006, one percent faster than last year’s growth rate and a half a percent higher than the Commission’s forecast for 2006 made six months ago. Despite this healthy growth, inflation will remain at a reasonable 2.2% and should decline throughout 2007 and 2008 to 2%.

What It Means:
Europe’s growth is based on gradually stronger domestic demand, and trade with emerging market countries. This will protect their economy from the downturn in the U.S. economy.

Action Steps:
A healthy allocation of European mutual funds will protect your portfolio from a possible downturn in the U.S. stock market. Since European growth is slower, and more stable, it will also provide a nice hedge from any setbacks in the emerging markets portion of your portfolio. Check with your financial planner to find a good fund.

Source: European Union Newsletter Eurostat November Press Release; Bureau of Economic Analysis Q3 GDP Press Release; European Central Bank November Bulletin, Europe Newsletter, “Autumn economic forecast : EU economy at its best in 2006”