Eurozone growth slows, France and Italy falter

[BRUSSELS] Eurozone second quarter growth slowed sharply, official data confirmed Friday, weighed down by Brexit concerns and a poor performance in struggling France and Italy.

Growth in the 19-nation eurozone came in at 0.3 per cent, down from 0.6 per cent in the three months to January but unchanged from the initial estimate given last month, the Eurostat statistics agency said.

The 0.3 per cent quarterly gain was in line with average forecasts compiled by data company Factset.

Analysts said at the time of the initial release that uncertainty in the run-up to Britain's shock June 23 vote to quit the European Union had likely dampened activity after a very strong first quarter.

Compared with a year earlier, the eurozone expanded 1.6 per cent in the three months to June, also unchanged from the initial estimate.

Germany, Europe's biggest economy did better than expected with a gain of 0.4 per cent in the second quarter, down from 0.7 per cent in the first.

German officials said the relatively strong performance reflected a pick-up in exports while private and public sector consumption also increased.

Analysts were mixed on the outlook.

Holger Schmieding, at Berenberg bank, said Germany was in a strong position to weather the Brexit fallout on the back of "solid domestic fundamentals, a buoyant labour market, rising real incomes, a modest fiscal stimulus and excellent financing conditions."

Carsten Brzeski at ING Diba was more cautious, citing weak investment as cause for concern in a recovery "clearly running on its very last leg". On the downside, second-ranked France slumped to zero growth from 0.7 per cent in the first, stoking concerns over the economic outlook.

The Bank of France said on Monday that it now expected growth of 0.3 per cent in the third quarter, after its 0.2 per cent growth estimate for the second quarter was squashed by the facts.

Wednesday showed French industrial production dropped for a second straight month in June, an outcome analysts said was alarming. Output fell 0.8 per cent in June, after dropping 0.5 per cent in May.

For the eurozone as a whole, June industrial output rose 0.6 pct after a fall of 1.2 pct in May to give a year-on-year gain of 0.4 pct, Eurostat said separately Friday.

Italy, whose banks are under great pressure in a faltering economy, also slowed to zero growth in the second quarter after a rise of 0.3 per cent in the first.

The Italian economy emerged from three years of recession at the start of 2015 but gains since then have been minimal.

The International Monetary Fund last month cut its Italy growth forecast from 1.1 per cent to 0.9 per cent, largely to take account of the negative Brexit impact.

Spain, still bouncing back strongly after years in recession, grew 0.7 per cent, just down from the 0.8 per cent expansion of the first quarter.

Non-euro Britain meanwhile gained 0.6 per cent after 0.4 per cent.

Earlier this month, the Bank of England slashed interest rates to a record low 0.25 per cent and announced a vast stimulus package to offset the fallout from the Brexit vote.

AFP