Euro zone growth slows in second quarter

BRUSSELS • Growth in the 19- nation euro zone slowed slightly during the second quarter to 0.3 per cent, coming in at the bottom end of analyst forecasts, official data showed yesterday.

The economy had expanded 0.4 per cent in the first quarter, continuing a modest recovery. But recent data has shown inflation and unemployment little changed despite a massive European Central Bank (ECB) stimulus programme.

Analysts had expected second-quarter growth to come in at 0.3 to 0.4 per cent. Compared with the second quarter of 2014, the economy grew 1.2 per cent, the Eurostat statistics agency said.

The full 28-member European Union, meanwhile, gained 0.4 per cent in the second quarter and was up 1.6 per cent compared with a year earlier.

The euro zone slowdown reflected a sharp reverse in France - flat after a jump of 0.7 per cent in the first quarter - which was offset in part by a pick-up in Germany, Europe's powerhouse economy, to 0.4 per cent from 0.3 per cent.

Analysts at Capital Economics said the euro zone economy would probably continue to bump along, supported by Spain and Germany, but with France unlikely to show much improvement.

Among the larger economies, Spain was one of the best performers with a gain of 1 per cent in the second quarter, while Italy added just 0.2 per cent.

"We suspect that growth in the region as a whole will slow further in the second half of the year as temporary boosts from a weaker euro and lower oil prices fade," analyst Jennifer McKeown said in a research note. "This underlines the need for the ECB to maintain and perhaps extend its policy support."

The ECB has pledged to pump more than €1 trillion (S$1.5 trillion) into the economy until September next year to boost demand and credit. Data last month showed the July euro zone inflation rate unchanged at 0.2 per cent. Unemployment for June was also flat.

The inflation data has been a cause for concern as the figures reflect consumer demand and have fallen well short of the ECB's inflation target of just under 2 per cent.


A version of this article appeared in the print edition of The Straits Times on August 15, 2015, with the headline 'Euro zone growth slows in second quarter'. Print Edition | Subscribe