French growth stalls: report

Economic growth in the eurozone slowed in the second quarter as France stagnated and Italy lost momentum, held back by an uncertain global outlook that is even weakening investment in powerhouse Germany.

Growth in the 19-country currency bloc slowed to 0.3%, missing expectations for a 0.4% quarterly expansion that would have matched the first quarter.

This relatively meagre growth came against a backdrop of heavy monetary stimulus from the ECB and a weak euro that boosted exports.

“The impact from slower growth in China will likely be largely offset by robust demand from the US and the UK”, said Holger Schmieding at Berenberg bank, forecasting 0.3% growth in the third quarter and 0.4% in the fourth.

In Germany, Europe’s largest economy, growth accelerated slightly to 0.4% in the second quarter from 0.3% in the first, but was below expectations for a 0.5% expansion as weak investment acted as a drag.

China’s decision to devalue the currency on Tuesday by pushing its official guidance rate down 2% has also sparked fears of a “currency war” and roiled global financial markets.

The mood among analysts and investors in Germany worsened in August due to concerns about the effect of an unstable global economic backdrop on the country’s export-dependent economy.

The euro fell sharply at the start of the year, shedding more than 8% on a trade-weighted basis between January and March — its weakest quarter ever.

In France, the currency area’s second biggest economy, a jump in exports was not strong enough to offset the impact of weak consumer spending and changes in inventories and growth came to a standstill after a strong first quarter.

Italy’s economy grew by 0.2% in the second quarter after 0.3% in the first as a weak recovery from three years of recession lost momentum.

Economic reports from northern eurozone economies also gave little reason for optimism even though they have been spared the worst of the currency bloc’s debt crisis.

In the Netherlands, the economy grew 0.1% on the quarter in the April-June period.

In Finland, the economy contracted in April-June for the fourth consecutive quarter as the Nordic eurozone member struggles to revive exports to its major markets, Europe and Russia.


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