That was below forecasts of a 0.2 per cent rise and marked a sharp slowdown from the 0.7 per cent jump in the first quarter.
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GDP was dragged down by a negative contribution from inventories, with final domestic demand also soft, expanding only 0.1% quarter-on-quarter. While the dominant Germany economy transitioned its divestiture of the world-famous mark into the euro, weakening its currency status, it has provided its already triumphant export economy with greater competitiveness, due to the euro’s relative weakness.
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. An economy struggling to reach 0.4% growth is not particularly healthy.
The US economy is racing away so rapidly that a September interest-rate rise looks likely, and low oil and commodities prices are making almost all businesses’ lives easier.
Despite zero growth in France in the second quarter, Finance Minister Michel Sapin said the nation still on track to achieve the government’s forecast of one per cent growth for the year.
“Looking ahead, business surveys suggest that the euro-zone economy will continue to expand, led by strong growth in Spain and a solid German economy”.
As Germany kept up its with its economic expectations, growing 0.4 per cent just as it did last quarter, Italy missed its by a decimal point.
Analysts had expected second quarter growth to come in at 0.3-0.4 percent.
Germany’s GDP report didn’t include a component breakdown, but Destatis said net exports were the main driver of activity in the second quarter, as foreign trade got a fillip from a weaker euro, which makes eurozone goods more competitive elsewhere.
Dutch growth also disappointed, with the country’s GDP expanding 0.1 percent in the three months through June.
INSEE said household consumption expenditure decelerated sharply (+0.1% after +0.9%) while their total gross fixed capital formation (GFCF) decreased again (-1.6% after -1.1%).
Tom Rogers, an economist at EY in London said the divergence in growth is a “reminder that domestic economic reforms matter as much as eurozone-wide solutions”.
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“European equity markets have made no serious attempt to recoup the losses that were sustained at the beginning of the week, and if sentiment can’t be boosted on the back of the Greek deal, I suspect we are in for another move lower”, said David Madden, market analyst at IG (LSE: IGG.L – news) .
