Economic Views

Eurozone GDP moderates as Spain remains resilient

French growth flat-lines as Spain remains resilient


Azad Zangana

Azad Zangana

Senior European Economist and Strategist

The preliminary estimate for eurozone GDP showed the monetary union grew by 0.3% in the three months to June, matching consensus estimates. Growth moderated in the latest quarter having seen 0.6% GDP growth recorded in the first quarter of the year, although the slowdown is not a serious concern.

As this is an early estimate of growth, we only have partial details of the results.

France taking a break

France reported its GDP figures today (Friday), showing the economy had flat-lined in the second quarter, after a strong first quarter of 0.7% growth (revised up from 0.6%). The French statistics agency (INSEE) reported a significant drop in domestic demand following three strong quarters. Consumption was flat, while investment contracted slightly. Exports fell slightly, but imports fell more sharply, leading to a positive contribution from net trade, and offsetting the weakness in domestic demand.

While the French figures are disappointing (consensus estimates were for 0.2% growth), set against the context of recent stronger quarters, it appears that the economy is taking a break. A sharp reduction in inventories also shaved 0.4 percentage points from the headline figure, but this suggests that inventories are now at a lower and more healthy level, reducing the need for more destocking.

Spanish resilience

Elsewhere, Spain matched expectations by growing by 0.7%, marginally lower than the 0.8% recorded in the first quarter. An expenditure breakdown is not yet available, but the figures highlight the resilience of the Spanish economy, which in June lowered its unemployment rate below 20% for the first time since May 2010.

Inflation too low for comfort

Flash eurozone inflation figures for July were also published today and showed the headline harmonised index of consumer prices (HICP) up by 0.2% year-on-year. Inflation was up from 0.1% in June, and suggests that the ongoing slow recovery remains on track.

Within the details, core inflation (excluding energy, food, alcohol & tobacco) remained unchanged at 0.9%, with food price inflation responsible for most of the rise in the headline rate.

Inflation remains too low for comfort for the European Central Bank (ECB), which may persuade president Mario Draghi to add more stimulus later this year. We expect a further cut in the deposit rate to -0.5%, and possibly an extension of its quantitative easing programme.


  • Europe ex UK
  • Azad Zangana
  • Growth
  • GDP