Eurozone GDP growth rate halves in second quarter

The single currency’s aggregate GDP expanded by 0.3 per cent in the three months to June, down from the 0.6 per cent expansion rate in the first quarter

Graffiti art displaying the European Union (EU) flag and a euro symbol (Getty)

Eurozone growth slipped back in the second quarter of the year and dried up entirely in Italy, the bloc’s most troubled large economy.

Eurostat reported that the single currency’s aggregate GDP expanded by 0.3 per cent in the three months to June, down from the 0.6 per cent rate in the first quarter.

This was in line with the statistics agency’s “flash” estimate from 29 July.

Italy – which is struggling with a banking crisis and whose prime minister has called a decisive referendum on constitution reform in November – registered zero growth over the quarter.

France, which will hold presidential elections next year, also stagnated, following a 0.7 per cent surge in the first quarter.

Germany, the bloc’s powerhouse, saw 0.4 per cent growth, also down from 0.7 per cent in the first quarter, although this was better than the 0.2 per cent reading analysts had expected.

Eurozone slowdown

UBS

“Growth stalled in Italy and France, as exports struggle and domestic demand is cooling,” said Favio Balboni of HSBC.

“This is worrying given the difficult political agenda ahead, with a referendum at the end of the year in the former, and elections next year in the latter. Even the positive surprise in Germany was driven by weak imports, once again casting doubts on the ability of Germany to be the driver of eurozone growth.”

Analysts also cautioned that the data was from the period prior to the UK’s Brexit vote, which could have a negative impact on the single currency zone’s output.

“We think the data for [the second half of] 2016 will need to be monitored closely,” said Felix Huefner of UBS.

The strongest growth came from Poland and Slovakia, where output surged by 0.9 per cent.

Spain also saw solid growth of 0.7 per cent in the quarter.

Greece’s GDP grew by 0.3 per cent, following a 0.1 per cent contraction in the first quarter.