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Financial News: Eurozone Q2 Growth At 2-Year Low, Inflation Exceeds

Eurozone Q2 Growth At 2-Year Low, Inflation Exceeds Target Again

07/31/2018 - 09:04:00 (RTTNews)

(RTTNews) - After a weak start to the year, the euro area economy grew at the slowest pace in two years in the second quarter, while inflation exceeded the central bank's target again in July, official data showed Tuesday.

According to a preliminary flash estimate from Eurostat, gross domestic product grew 0.3 percent from the first quarter, when the economy expanded 0.4 percent. A similar slower growth was last seen in the second quarter of 2016.

On a yearly basis, GDP growth eased to 2.1 percent from 2.5 percent in the previous quarter.

Flash estimate for the second quarter is due on August 14.

Economists had forecast a sequential growth of 0.4 percent and 2.2 percent annual expansion.

Among major economies, France expanded only 0.2 percent due to weak household consumption. Elsewhere, Spain logged its weakest growth in four years in the second quarter, with GDP rising 0.6 percent.

At 0.2 percent, Italy's GDP growth was the weakest in two years in the second quarter.

Separately, flash data from Eurostat showed that inflation accelerated for a third straight month in July to its highest level since late 2012.

Largely driven by energy prices, harmonized inflation in the currency bloc rose to 2.1 percent in July from 2 percent in June. The annual rate was expected to remain at 2 percent.

Inflation exceeded the European Central Bank's target of "below, but close to 2 percent" for a second month in a row.

Core inflation, excluding energy, food, alcohol and tobacco, accelerated to 1.1 percent from 0.9 percent in June.

The weaker cyclical picture and low core inflation provide little reason for the ECB to increase rates before autumn next year, Bert Colijn, an economist at ING Bank, said.

Any "behind the curve" thoughts that surfaced earlier this year when the mood was still Europhoric can be parked for the moment, the economist noted. The unemployment rate in 19-nation bloc held steady at the lowest level since December 2008, Eurostat reported Tuesday. The jobless rate came in at 8.3 percent in June, as expected.

The number of unemployed increased by 14,000 from the previous month to 13.57 million in June.

Data released by Germany's Federal Labor Agency showed that the unemployment rate in the largest euro area economy remained at 5.2 percent in July, the lowest since the German reunification.

The number of unemployed fell by 6,000 in July from June compared to expected decline of 10,000.

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