Eurozone GDP stays flat in second quarter
The EU’s statistics office confirmed its earlier estimate that the output of the 18 countries using the euro was unchanged in the April to June period, on a quarter-on-quarter basis, although it rose 0.7% year-on-year.
Eurostat data showed a drop in inventories subtracted 0.2 percentage points from the overall result in the second quarter, offsetting a 0.2 point positive contribution from household consumption.
Falling investment subtracted 0.1 point, off-setting a positive contribution from next trade of the same size.
Investment has been weakening since the last quarter of 2013 and many top EU policymakers believe it is the main instrument that could help revive growth since interest rates are already at record lows and many governments need to continue to consolidate bloated public finances.
Poland’s finance minister called on Thursday for the creation of a European Fund for Investments that would be able to finance, through leveraging its own capital, €700bn worth of investment, to revive the stagnant economy.
Germany, the eurozone’s biggest economy, cautioned on Monday that too many EU countries believed public investment could solve the growth problem, pointing to the need of mobilising privet funds as well.
Meanwhile, inflation pressures in the eurozone have risen to a 28-month high, suggesting prices may rise faster than in recent months, an indicator designed to forecast cyclical trends showed yesterday.
The Eurozone Future Inflation Gauge, published by the Economic Cycle Research Institute, rose to 97.4 in July from 96.6 in June.
“With the Eurozone Future Inflation Gauge climbing further in its latest reading, eurozone inflation may bottom-out in the months ahead,” Lakshman Achuthan, the ECRI’s chief operating officer said.
ECB president Mario Draghi announced a stimulus programme on Thursday to buy asset-backed securities and covered bonds in the latest attempt to revive the flagging eurozone economy and boost inflation. Annual inflation fell to just 0.3% in August according to a flash estimate, well below the ECB’s target of just under 2% and what it terms the “danger zone” of 1%.
