Eurozone GDP misses forecast in second quarter

Italian economic growth slowed to 0.2 per cent in the second quarter after seeing 0.3 per cent in the first quarter. The single currency did gain back some ground in the second quarter, rising just over 2 percent, but since the start of the year it is down nearly 6 percent.

The data also highlight the big divergences within the 19 countries sharing the euro, which threaten the region’s prospects for a sustained recovery.

The eurozone 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.

The INSEE said that the total domestic demand has decelerated at a strong pace, contributing for only 0.1 point to the GDP growth in Q2 2015 after a 0.6 points growth recorded in Q1 2015.

The worldwide Monetary Fund last month cut its forecast for global growth, singling out financial-market turbulence in China and Greece.

But the index turned negative after gross-domestic-product data showed the eurozone’s economic recovery lost momentum in the second quarter.

German growth was driven by net exports and private consumption, the statistics office said, while investment, especially in construction, was a drag.

In France, weak consumer spending over shadowed a rise in exports which cancelled the impact of and changes in inventories and hence, growth was stagnated after a strong 1st quarter.

While growth will continue, it will slow “as temporary boosts from a weaker euro and lower oil prices fade”, said Jennifer McKeown, an economist at Capital Economics in London.

“The weaker than expected increase is largely attributable to France, where the economy has once again ground to a halt”, said Chris Williamson, chief economist at Markit, in a note.

“Concerns over growth in emerging markets, China in particular, may hit investment in Germany, the Netherlands and Austria, which all disappointed in the second quarter”, Mr Zangana added.

ING DiBa economist Carsten Brzeski said that “neither Greece nor China were able to stop the German economy”.

The German economy grew 0.4% in the second quarter, up from 0.3% in the first quarter.

The carry over from the first half of the year means the government’s 1 per cent growth forecast for the year is still well within reach but could make it harder to beat that target, as many expected, analysts said.