Euro zone economic growth slows as France and Italy stall

Economic stagnation in France and Italy contributed to a slowdown in growth in the euro zone from April to June after a strong performance in the first three months of the year, estimates showed on Friday.

Gross domestic product (GDP) in the 19-country currency union expanded 0.3 per cent in the second quarter from the first and was up 1.6 per cent compared with the same quarter last year, statistics agency Eurostat said, confirming market expectations and its own initial data issued in late July.

The quarterly rate of growth halved from January-March’s 0.6 per cent expansion, while the annual rate of growth was only marginally slower than the first quarter’s 1.7 per cent.

The slowdown was mainly due to France and Italy reporting no growth in the quarter, offsetting relatively robust readings for Spain and the Netherlands of 0.7 per cent and 0.6 per cent respectively.

Italy's standstill was below the expected 0.2 per cent growth and adds to the woes of prime minister Matteo Renzi, who in autumn faces a constitutional referendum on which he has staked his job.

Belgium fares well

Growth in Germany, the union’s biggest economy, slowed to 0.4 per cent in the second quarter from 0.7 per cent in the first, but that was better than the 0.2 per cent consensus forecast of economists polled by Reuters.

"Today's German and Dutch flash GDP estimates surprised to the upside, more than offsetting a flat GDP print in Italy," Marco Protopapa, economist at JP Morgan, said in a note.

The stronger-than-expected German data helped the bloc as a whole avoid a downward revision from Eurostat’s preliminary estimates for the quarter, as some economists had feared.

"The fact that Q2's growth rate was not revised down from the 'preliminary flash' estimate of +0.3 per cent was something of a relief after the additional national data released earlier this morning," said Jonathan Loynes of Capital Economics.

The euro zone’s smaller economies fared well. Belgium’s GDP grew 0.5 per cent on the quarter, faster than the 0.2 per cent rise in the first three months of the year.

Greece emerged from a mild recession in the first quarter, posting 0.3 per cent growth in the April-June period.

The European Union economy grew slightly faster than that of the euro zone, expanding 0.4 per cent on the quarter and 1.8 per cent compared with the same period last year.

– Reuters