French economy stagnates as German GDP misses forecasts

Inflation continued to undershoot the ECB’s medium-term target of just below 2 per cent despite a series of unprecedented measures by the central bank, including a massive quantitative easing program that allows the ECB to purchase government bonds and private debt securities worth more than €1 trillion ($US1.1 trillion) by September 2016.

The proposed deal involves tax rises and spending cuts, with negotiators having on Tuesday agreed a budget with a primary deficit of 0.25% of gross domestic product (GDP) in 2015, improving to a 0.5% surplus in 2016, 1.75% in 2017 and a 3.15% surplus in 2018.

Peter Vanden Houte, an ING Bank NV economist, said even if the growth pace was slightly lower than in the first quarter, the relative immunity of the European economy to the Greek crisis and the Chinese slowdown remains encouraging, although it is probably still a bit too soon to claim victory on this front.

Finance Minister Michel Sapin insisted that the second biggest economy in the eurozone was still on course to post 1 percent growth over the year as a whole.

At the beginning of this year it looked like the Eurozone economy had turned a corner.

The euro zone’s second-largest economy grew by 0.7 percent in the first quarter, INSEE said, up from a previous estimate of 0.6 percent.

Similarly, growth in Portugal and Belgium remained unchanged at 0.4 percent.

Estonia recovered in the second quarter, with GDP rising 0.8 percent following a 0.3 percent fall. Investment in real estate, however, contracted for the eighth quarter in a row. On a monthly basis, consumer prices fell 0.6 percent. European Union annual inflation was 0.1% in July 2015, also stable compared to June.

“There are potential downside risks to the euro area GDP release”, said Elga Bartsch, an economist at Morgan Stanley, noting that quarterly GDP growth may “round down to 0.3%”.