Friday 20 April 2018

Euro zone recovery stalls in second quarter

Some economists are predicting the ECB will cut rates again
Some economists are predicting the ECB will cut rates again

Falling investment and a drop in inventories kept euro zone gross domestic product flat in the second quarter against the previous three months despite growing household consumption and a positive contribution from trade, data showed on Friday.

The European Union's Statistics Office confirmed its earlier estimate that the output of the 18 countries using the euro was unchanged in the April-June period quarter-on-quarter, although it rose 0.7 percent year-on-year.

Eurostat data showed a drop in inventories subtracted 0.2 percentage points from the overall result in the second quarter, offsetting a 0.2 point positive contribution from household consumption.

Falling investment subtracted 0.1 point, offseting a positive contribution from next trade of the same size.

Investment has been weakening since the last quarter of 2013 and many top EU policy-makers believe it is the main instrument that could help revive growth since interest rates are already at record lows and many governments need to continue to consolidate bloated public finances.

Poland's finance minister called on Thursday for the creation of a European Fund for Investments that would be able to finance, through leveraging its own capital, 700 billion euros (555.57 billion pounds) worth of investment, to revive the stagnant economy.

Germany, the euro zone's biggest economy, cautioned on Monday that too many EU countries believed public investment could solve the growth problem, pointing to the need of mobilising privet funds as well.

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