Euro zone grows less than expected in second quarter

The eurozone’s hopes for a strong economic recovery this year have soured over the past couple months, partly because of the crisis over Greece’s future in the currency zone and fading growth in China.

Still Eurostat reported that the biggest world economy, the US, also posted a less than one percent growth in the second quarter as it recorded a 0.6 percent growth compared with the previous quarter (after +0.2 percent in the first quarter of 2015). Lackluster consumer spending and lower inventories were the main culprits there. Norwegian oil and gas firm, Statoil, was down 3.2 percent, while oil services company, Subsea 7, was also down 3.7 percent.

An increase in Germany’s growth rate, largely due to strong exports in the wake of the euro’s sizeable drop since last year, helped offset a sharp slowdown in France. Many analysts said they were disappointed that Germany had missed expectations of a minimum 0.5% growth rate and blamed weakening growth in China for the shortfall.

European equities fell on Friday after as a series of economic reports showed the Eurozone’s economic recovery lost momentum in the second quarter.

The economy grew by 0.4pc in the quarter between April and June after expanding by 0.3pc in the first three months of 2015.

German GDP had been forecast to rise 0.5 percent in a Bloomberg survey.

Separate data from Destatis, Germany’s federal statistics office, showed that Germany’s economy grew by 0.4% in Q2 and 1.6% compared to the same quarter in 2014. German auto parts and tire maker Continental this month raised its full-year profit outlook after quarterly earnings jumped more than expected on a strengthening European vehicle market.

Rasmus Gudum-Sessingø, an economist at Handelsbanken, warned that the peripheral economies won’t be able to maintain the present pace of growth and might even “contribute to negative risks, not least through increased political uncertainty”, with elections taking place in Portugal and Spain later this year.

Eurozone annual inflation for July was confirmed at 0.2% (http://www.marketwatch.com/story/eurozone-inflation-remains-weak-in-july-2015-08-14), as was expected by economists. The surprise surge, led by consumer spending and tourism, is seen by analysts as a blip amid a crumbling economy.

“Looking ahead, we forecast a slight acceleration going into the second half of the year as further falls in global energy prices should boost the purchasing power of households”.