Eurozone recovery stalls in Q2

The eurozone recovery has ground to a halt in the second quarter as revealed by a disappointing set of GDP data.

Overall the growth of GDP in eurozone nations either stagnated or contracted in the second quarter, thus failing to meet a consensus forecast of 0.1 per cent expansion for the eurozone in total. 

German GDP contracted at minus 0.2 per cent while the French GDP did not grow at all with 0 per cent growth.

While Spain’s GDP did expand by 0.6 per cent and the GDP of Netherlands expanded by 0.5 per cent, Italy’s GDP contraction – of 0.2 per cent – contributed to an overall disappointing picture.

Germany – the largest economy in the eurozone – suffering such a contraction follows on from a poor set of industrial production data earlier in the month. 

The eurozone has continued to suffer from low inflation, well below ECB president Mario Draghi’s target of 2 per cent, and this has been reflected in poor economic data.

Capital Economics chief European economist Jonathan Loynes says: “As such, our forecast of a 1.0 per cent rise in eurozone GDP this year now looks optimistic – something in the 0.5 per cent to 0.7 per cent range is more likely.

“Overall, the numbers reinforce our view that the eurozone economy remains too weak either to tackle the periphery’s debt problems or to eliminate the dangers of deflation. As such, we still believe that the ECB needs to implement further policy action – probably in the form of full-scale quantitative easing – to try to bring the euro down and re-ignite the recovery.”