Eurozone growth stalls

14 Aug 14
Growth in the eurozone stagnated in the second quarter of the year, following major weaknesses in the German and French economies, according to figures published by Eurostat.

By Judith Ugwumadu | 14 August 2014

Growth in the eurozone stagnated in the second quarter of the year, following major weaknesses in the German and French economies, according to figures published by Eurostat. 

The official estimates from the EU’s statistical office saw growth of 0.0% in the 18-nation eurozone, in the three months to the end of July, compared with the previous quarter when the economy grew to 0.2%.

Germany and France, the bloc’s biggest economies, saw growth worsen as they contracted and stagnated, respectively.

Azad Zangana, European economist at Schroders, said the figures were disappointing and represented been the ‘worst period for the monetary union’ since the first three months of 2013.

They also raised questions over the direction of the growth heading into the second half of the year. 

‘Within the eurozone, Germany surprised most by posting growth of -0.2% quarter-on-quarter, while France also disappointed by stagnating [0.0%] for the past [two quarters],’ he said.

‘Meanwhile, early estimates for Italy revealed that it had slipped back into recession with a contraction of -0.2%. However, the eurozone aggregate was supported by some strong performances elsewhere, with both Spain and Portugal recording 0.6% growth, and Netherlands achieving 0.5% growth.’

Zangana also said it was worth remembering that the first quarter was unusually strong thanks to a very mild winter which boosted construction activity, particularly in Germany.

‘Therefore, a pull-back in activity was always likely in the second quarter and should mean that the third quarter is stronger,’ he added.

‘However, the seasonal factors do not fully explain the latest weakness recorded. Another factor which may have already had an indirect impact on growth is the escalating crisis in Ukraine.’

Across the European Union, the economy grew to 0.2% in the second quarter, Eurostat revealed.

Meanwhile, annual inflation in the eurozone fell to 0.4% in July, down from 0.5% in June. The estimates show inflation at its lowest rate since October 2009.

Negative annual inflation rates were observed in Bulgaria (-1.1%), Greece (-0.8%), Portugal (-0.7%), Spain (-0.4%) and Slovakia (-0.2%).

The highest annual rates were recorded in Austria (1.7%), Romania (1.5%) and Luxembourg (1.2%). 

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