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Euro zone second-quarter growth halves, inflation slows despite jobless at 11-year low

Euro zone second-quarter growth halves, inflation slows despite jobless at 11-year low
FILE PHOTO: European Union (EU) flags fly in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 3, 2015. REUTERS/Ralph Orlowski/File Photo -
Ralph Orlowski(Reuters)
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BRUSSELS (Reuters) – Euro zone economic growth halved in the April-June period and inflation slowed sharply in July even though the unemployment rate fell to its lowest in 11 years, data from the European Union’s statistics office showed on Wednesday.

Eurostat’s preliminary flash estimate of gross domestic product growth in the 19 countries sharing the euro showed the economy expanding 0.2 percent quarter-on-quarter, down from 0.4% in the previous three months, as expected by economists.

Growth in the euro area therefore returned to the anaemic rates seen in the third and fourth quarters of last year.

Year-on-year, euro zone GDP growth was 1.1%, slowing from 1.2% in the January-March period.

The slower growth was reflected in decelerating consumer price growth — Eurostat’s flash estimate showed year-on-year inflation in July was 1.1%, down from 1.3% in June, as expected by economists.

The headline inflation rate was the lowest reading in 17 months.

The slowing inflation rate is likely to further strengthen market expectations that the European Central Bank, which wants to keep inflation below, but close to 2%, will further loosen monetary policy in September.

Core inflation, which strips out the volatile components of unprocessed food and energy and which the ECB closely looks at in policy decisions, also fell to 1.1% in July from 1.3% in June.

The even more narrow measure excluding also alcohol and tobacco prices that many market economists look at was down to 0.9% from 1.1%.

The slowing price growth comes despite unemployment in the euro zone hitting an 11-year low of 7.5% of the workforce in June, Eurostat data showed.

(Reporting By Jan Strupczewski; editing by Philip Blenkinsop)

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