German growth slowed less than predicted in the second quarter while Italian output unexpectedly stagnated, signalling diverging fortunes for two of the region’s biggest economies as they brace for any fallout from Britain’s decision to leave the EU.
Meanwhile, separate eurozone-wide figures showed the bloc’s economy grew 0.3% in the quarter, or 1.6% annual pace, and showed the eurozone was already slowing ahead of the UK’s shock June 23 vote.
The official data showed that a burst of activity at the start of the year was fleeting and more stimulus may still be required.
“The question remains if even this lower growth rate can be sustained in Q3,” wrote ING senior economist Bert Colijn.
Germany’s GDP rose 0.4% in the three months through June, following an increase of 0.7%. Italy’s economy unexpectedly stalled after expanding 0.3% in the previous quarter. Analysts predicted growth of 0.2%.
With GDP also stagnating in France, which reported initial data last month, Germany’s role in keeping the eurozone recovery on track has risen as risks related to the outcome of Britain’s referendum cloud the outlook.
Italy’s stagnation will further weigh on prime minister Matteo Renzi as he prepares for a referendum on which he has staked his political future.
The Bank of Italy and the IMF have both revised down their economic outlook, predicting growth of less than 1% this year.
Companies from Siemens to Evonik Industries have struck a positive tone in earnings reports over the past weeks, even though they warned that uncertainty in the aftermath of the June referendum may alter prospects — the country is the third-largest destination for German exports.
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