A slump in French manufacturing and construction sapped the strength of the eurozone economy in the second quarter, pushing the 19-member currency bloc’s GDP growth rate down to 0.3% from 0.4% in the first three months of the year.
A solid performance by Germany and continuing expansion, albeit modest, in Italy offset the figures from Paris, which showed that the second-largest economy in the currency bloc failed to expand between April and the end of June.
Analysts said uncertainty surrounding the outcome of the Greek crisis weighed on consumer and business confidence, especially in France, which trades heavily with the rest of the eurozone.
Germany, which has dramatically extended its trading links with the far east and China in recent years, saw its manufacturing sector continue to strengthen despite the ongoing row between Athens and its creditors. Exports in Europe’s biggest economy did particularly well, a sign that the weaker euro is helping.
But slowing global trade and concerns over domestic consumption in China are expected to dampen the German manufacturing powerhouse, with only Mercedes appearing insulated from weakening Chinese demand for cars. Many analysts said they were disappointed that Germany had missed expectations of a minimum 0.5% growth rate and blamed slowing growth in China for the shortfall.
“The weak GDP reading for Germany is also a result of slowing growth in China,” said Naeem Islam, chief market analyst at AvaTrade. “The recent rout in the Chinese yuan could further damage growth in Germany if the current efforts by the Chinese central bank fail to curb the currency sell off.”
Eurostat, the European Union’s statistics agency, said the figures, which are preliminary and have no details beyond country rates, showed Germany growing 0.4% during the quarter, up from 0.3%.
Spain’s recovery maintained its momentum with a 1% spurt in the second quarter that built on a 0.9% growth rate in the first three months. Poland managed 0.9%, as did the Czech Republic.
However, France, which showed signs of a strong recovery in the first quarter with a 0.7% rise in the first quarter, was the biggest surprise after it registered 0% growth.
Finland continued its terrible run with a 0.4% contraction, double the 0.2% contraction earlier this year. The Netherlands and Austria could only manage 0.1% growth, while Portugal, which is battling to recover while complying with a Brussels-inspired austerity drive, managed 0.4%.
Peter Vanden Houte, an economist at ING, blamed a lack of consumption by households and businesses for the worse-than-expected figures, but said the figures showed a resilience to disruptive forces inside and outside the currency bloc that should stand it in good stead for the year.
“Consumption growth, having been boosted in the first quarter by the sharp drop in energy prices, probably softened slightly in the second quarter, as oil prices climbed again,” he said.
“However, with the renewed drop in oil prices and the ongoing improvement of the labour market, we expect consumption to be an important growth driver in the second half of the year.
“Inventories have likely shaved off a bit of growth in the second quarter, but this actually bodes well for the second half, as industrial orders remain strong according to the European commission’s business survey.”
European stocks regaining some of the week’s losses after news that the Greek parliament approved a third multibillion-euro bailout deal offset the underwhelming GDP figures.
In early European trading, the FTSEurofirst index of leading 300 European shares was up 0.5% at 1,538 points, as was the Euro Stoxx 50 index of leading eurozone shares at 3,349 points. Germany’s DAX and France’s CAC40 were both up 0.6%. Britain’s FTSE 100 was up 0.4%.
Earlier on Friday, the Greek parliament voted to approve the country’s third financial rescue by foreign creditors in five years. The prime minister, Alexis Tsipras, still faces a confidence vote later this month. Meanwhile, official figures showed that the German and Italian economies expanded more slowly than expected in the second quarter. The French economy did not grow at all.