A zoom-burst image shows the illuminated euro sign in front of the headquarters of the European Central Bank (ECB) in Frankfurt in this April 5, 2011 file photo.© Kai Pfaffenbach / Reuters/Reuters
Economic growth across the 19-country euro zone halved in the second quarter, official figures showed Friday, in a development that's more likely due to the fading boost from lower oil prices and weaker euro than to concerns in the run-up to the British vote on whether to leave the European Union.
In its first estimate for the April to June period, Eurostat, the EU's statistics agency, said growth across the single currency bloc eased to a quarterly rate of 0.3 per cent from the previous quarter's 0.6 per cent.
The decrease was in line with market expectation and the euro was steady at around $1.11.
No explanation for the moderation was provided but analysts said growth was hurt by a moderation in the tail-winds that had helped the region in the first quarter. The sharp drop in oil prices has reversed slightly, meaning that the boon to households and businesses has largely played out. And the dividend from the previous export-boosting depreciation in the value of the euro has diminished as the currency has steadied.
The June 23 referendum in Britain may have also caused some uncertainty, prompting businesses to delay investment decisions. The evidence since confirmation that Britain voted to leave the EU shows that Europe has brushed aside much of the uncertainty generated by the decision.
Separately, Eurostat said consumer prices across the region rose to 0.2 per cent in the year to July from the previous month's 0.1 per cent, and that the core rate, which strips out volatile items such as food, alcohol, energy and tobacco, held steady at 0.9 per cent.
That's likely to prove a modest relief to policy makers at the European Central Bank who have cut interest rates and deepened a monetary stimulus program largely to make sure that prices don't actually fall over a long period of time. So-called deflation can weigh on economic activity as consumers delay spending in anticipation of lower prices further out and businesses grow increasingly reluctant to invest and hire.
The euro zone's recovery from recession over the past two to three years has helped unemployment across the region fall at a solid if unspectacular rate. Eurostat figures Friday showed that the number out of work in the euro zone fell by 37,000 in June to 16.27 million but that the unemployment rate held steady at near five-year lows of 10.1 per cent.