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Euro zone GDP weak in second quarter

Euro zone GDP weak in second quarter
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The euro zone economy grew marginally in the second quarter, but household consumption fell for the first time in nearly two years, according to the latest figures from the EU’s statistics office.

What expansion there was came from exports and companies building up inventories of goods.

Growth slowed sharply from the previous quarter and economists said third and fourth quarter growth numbers were likely to be much worse

The European Union’s statistics office Eurostat confirmed its estimate that gross domestic product in the 17 countries using the euro rose by 0.2 percent quarter-on-quarter in the April-June period.

In year-on-year terms, Eurostat revised down its GDP growth figure to 1.6 percent from its previous 1.7 percent.

Growth was sharply down on the 0.8 percent quarter-on-quarter and 2.4 percent year-on-year figures for the first three months of 2011.

But household consumption stripped 0.1 percentage points, with the first decline in euro zone private spending since the third quarter of 2009.

Economists said inflation, which hit 2.8 percent in April, its highest rate since October 2008, was most likely the cause, by reducing household’s purchasing power.

Consumer confidence is expected to have been further hit in July and August, when concerns about a possible contraction in the United States and Europe sent stock markets into a tailspin.

“Going forward, the consumption outlook is still weak but more due to confidence than inflation,” said Marco Valli, chief euro zone economist at UniCredit.