BU: Eurozone economic growth slows as China slumps
Unadjusted data showed the economy expanded by 1.6 per cent on the year in the second quarter, surpassing the Reuters consensus forecast for 1.5 per cent growth.
During July the inflation rate in the wider European Union was 0.1% – again on a par with June and below the figure for July 2014.
Overall growth fell short of analysts’ expectations, Bloomberg reported, and noted that five countries in the economic bloc missed economists’ growth estimates. The euro is a weak currency (relative to the value, say, that would be attributed to a Deutsche mark) that allows Germany to cheaply export to the rest of the world, resulting in monumental German trade and current account surpluses.
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. Its economy declined by 0.4 percent between April and June, continuing a recession that has seen the Nordic country shrink annually since 2012.
With most elements of economic activity – such as industrial production, retail sales and construction – already shown to have had a subdued quarter, economists think the quarterly growth rate was unchanged at 0.4 percent.
Over the past year or so, the euro has fallen to multiyear lows against the dollar.
The solid German expansion contrasted with a stagnation in the French economy in the second quarter.
Also on Friday, data showed the Dutch economy barely grew, while Portuguese GDP climbed 0.4 per cent, matching the pace of the first three months of the year.
“As such, with the new bailout deal likely to be signed off in the near future, I would expect Eurozone growth to look a lot healthier in the forthcoming quarters”. That annuled the 0.3 point increase to GDP from foreign trade and meager 0.1 per cent from domestic demand.
Germany’s Federal Statistics Office said weakness in investment and a marked drop in inventories weighed on growth in the second quarter, while the weaker euro helped support exports.
ING DiBa economist Carsten Brzeski said that “neither Greece nor China were able to stop the German economy”.
“Having highlighted downside risks to our forecast, this is weaker than what we and the consensus had expected, as well as domestic institute projections”, said Barclays. Many said France was unlikely to post growth of much more than 1pc this year.
