The outcome for growth in the Euro Area in the first quarter of 2003 was slightly weaker than our April projections. GDP grew by a marginal 0.1 per cent relative to the previous quarter, down from an average of 0.8 per cent over the year 2002 as a whole. The continued appreciation of the euro is largely to blame for this development, taking a toll on exports. The weaker outcome for the first quarter, coupled with the appreciation in the nominal effective exchange rate by about 6.9 per cent in the first half of this year, as well as significantly weaker prospects for private investment dampen the outlook for the year as a whole. Industrial production rose by 0.4 per cent in April, after a decline of 0.7 per cent in March and an increase of 0.3 per cent in February, supporting our expectation that recovery will be only gradual. In light of the most recent evidence, we have cut our estimate for Euro Area growth in 2003 by half, down to just over ½ per cent. However, we continue to anticipate a more pronounced improvement in 2004, as domestic and external demand both strengthen. We expect output growth in the Euro Area to return towards trend levels of about 2½-2¾ per cent per annum from 2005-2009. This is consistent with NIESR's output gap estimates for the Euro Area, which show the economy returning to capacity output in 2005.