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Eurozone economic growth slows in second quarter

Tuesday, 31 July, 2018 - 12:44

Economic growth in the eurozone slowed further in the second quarter, Eurostat reported on Tuesday, while inflation accelerated in July and the unemployment rate held steady at 8. 3 percent.

Gross domestic product (GDP) was up 0.3 percent in the April-June period compared with the previous three months, below the expectations of economists polled by Reuters, which forecast growth of 0.4 percent.

Over one year, growth in the second quarter was 2.1 percent against 2.2 percent according to the consensus of economists.

“Trade uncertainty seems to have already had a significant effect on the eurozone economy in the second quarter,” commented Bert Colijn, an economist at ING.

“With less confidence from business leaders and consumers, concerns have led to slightly weaker growth in domestic demand. In an economy where capacity constraints are numerous and financing conditions remain favourable, trust is the most likely factor to explain why investment remains depressed,” he added.

Eurostat has separately reported an acceleration of euro area price inflation to 2.1 percent year-on-year in July compared with 2.0 percent the previous month, mainly due to the rise in the cost of price of energy in the euro area, which was up 9.4 percent year on year after an 8.0% percent rise in May.

Non-volatile inflation, which is the price taken by the European Central Bank (ECB) for energy and unprocessed food products, stood at 1.3 percent year-on-year against 1.2 percent in June, above the expectations of economists.

Underlying inflation, which excludes alcohol and tobacco, stood at 1.1 percent year-on-year, compared to 0.9 percent in June, again exceeding the consensus.

The ECB’s objective is to keep annual inflation at just under 2 percent.

The unemployment rate in the euro area stabilized at 8.3 percent of the active population in June, the same level as in May, according to data published by Eurostat.

Germany has the lowest unemployment rate in the euro area, at 3.4 percent, but it has declined less than expected in July, highlighting the slowdown in growth in the bloc’s largest economy.

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