Eurozone growth slumps by 50%

The 19-nation currency bloc saw economic growth slow sharply in second quarter. EPA

Economic growth in the eurozone slowed by half in the second quarter, the latest in a string of reports flagging deteriorating economic prospects that increase the chance of more European Central Bank stimulus.

Cooling momentum risks extending a phase of too-low inflation that’s worrying policy makers. At their last meeting, they ordered staff to study everything from interest-rate cuts to asset purchases as they look at ways to prop up the economy.

The latest data showed the 19-nation region expanded 0.2 per cent last quarter, down from 0.4 per cent in the previous three months. The pace, in line with expectations, left year-on-year growth at 1.1 per cent, its weakest in more than five years. Inflation slowed to 1.1 per cent in July, the lowest since early 2018, and a gauge excluding volatile components such as food and energy was even weaker.

The reports confirm a trend observed in some of the region’s largest economies. Growth slowed in France, Spain, Austria and Belgium. A release later on Wednesday is set to show output in Italy probably contracted for the third time in four quarters.

Much of the slowdown engulfing Europe is linked to manufacturing and global trade tensions, with German industry hit particularly hard.

Germany’s GDP figures aren’t due until August 14 - though the eurozone outcome normally includes some German data provided to Eurostat by the country’s national statistics office. Separate figures on Wednesday showed a small increase in German jobless claims in July.

Companies there and across the region have issued profit warnings in recent weeks, pointing to trade tensions and weaker global growth. Deutsche Lufthansa reported the first loss for 30 months years at its freight arm as it flew with the most empty space in a decade.