PARIS: 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.