Eurozone grinds to halt as GDP remains flat

The eurozone economy ground to a halt in the second quarter of 2014 with GDP remained flat during the three months from March to June.

Data released today by Eurostat confirmed an earlier flash estimate that growth in the eurozone had stagnated in the three-month period, falling from a previous level of 0.2 per cent for the first quarter of 2014.

Compared to the same quarter a year previous GDP rose marginally by 0.7 per cent during the second quarter.

Investment proved the biggest driver of the eurozone’s recent weakness falling by -0.3 per cent quarter on quarter but elsewhere household spending increased at the fastest pace since the third quarter of 2011 after rising 0.3 per cent while net exports rose from 0.1 to 0.5 per cent over the same period.

Capital Economics chief European economist Jonathan Loynes expects the downturn in investment “may be reversed in the coming quarters” but warns that the eurozone could be set to produce “meagre” overall growth in 2014.

He adds: ”It is not clear that this provides a foundation for stronger growth ahead. The recent fall in consumer confidence casts doubt over whether household spending will continue to grow. And while the weaker euro may have improved export prospects, this could be offset by the more uncertain international environment.

“Against this background, we continue to expect eurozone GDP to grow by a meagre 0.7 per cent or so this year.”