Euro zone recovery stalls in second quarter
German economy contracts, France reports second straight quarter of zero growth
Thursday 14 August 2014
The economic recovery in the euro zone stalled in the second quarter amid fears over the crisis in Ukraine and softer trade and investment.
The main reasons behind the flat outcome was a 0.2 percent quarterly decline in Germany, Europe's biggest economy, and a second straight quarter of zero growth in France, the second largest economy.
The outcome reported by Eurostat, the European Union's statistics office Thursday, was slightly lower than the 0.1 percent growth expectation in the markets.
Economists say fears the Ukraine crisis may escalate are making companies hesitate to invest and consumers to postpone spending. A lack of economic reforms in France has also played a role. So did a mild German winter that shifted construction from the second quarter to the first.
The German state statistical office said that imports, supported by steady demand from domestic consumers, rose more than exports did, lowering overall output figures.
Spending on business investment also fell, particularly in new buildings. A mild winter may have moved construction activity up to the first quarter, meaning the poor second quarter figure may understate growth.
Surveys of business confidence in Germany are also suggesting that fears about the Ukraine crisis have made companies more cautious about their plans to invest in expanding their businesses. Ukraine fears have only grown since the end of the quarter on June 30.
Since then, the shooting down of Malaysia Airlines Flight 17 over Ukraine on July 17 has ratcheted up tensions dramatically and prompted tit-for-tat sanctions between Russia and the European Union. Meanwhile, France's economy has slowly stagnated as pro-business reforms have lagged.
"While the Q2 weakness should remain temporary for Germany, France remains mired in economic stagnation due to a lack of reform," economist Christian Schulz at Berenberg Bank said. "Weak investment highlights France's deep-running problems."
The figures will likely raise pressure on the European Central Bank to enact more measures to support the recovery.
Additional reporting PA
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...