Eurozone economy grew less than expected in second quarter

EUROZONE momentum slowed in the second quarter, the latest piece of bad economic news for the European Central Bank.

Gross domestic product rose 0.2 per cent from the previous quarter – less than the 0.3 per cent initially reported by the bloc’s statistics agency. While trade and government spending supported growth, investment continued to be a drag, Eurostat said.

Private consumption – seen as a key pillar of the eurozone’s recovery – failed to take off in the period even as households benefit from slower inflation, rising incomes and a resilient labour market.

Employment grew again in the quarter, though the pace slowed to 0.2 per cent from 0.3 per cent, Eurostat said.

The data come less than a week before the ECB is forecast to lower interest rates again after an initial reduction in June. Sluggish economic momentum has emerged as a growing concern, with some officials warning that policy shouldn’t restrain the region for too long.

An key source of weakness is Germany, the bloc’s biggest economy, where output shrank in the second quarter amid a prolonged weakness in the important manufacturing sector.

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Industry also started the third quarter on a weak footing, according to data on Friday that showed production fell more than forecast in July, a trend also witnessed in France. BLOOMBERG