Euro zone Q2 growth slows German economy shrinks


The GDP flash estimates numbers, including year-on-year growth of 1.1% from the second quarter of 2019, were in line with economists' forecasts. The euro zone's GDP barely grew in the second quarter of 2019, data showed on Wednesday, as economies across the bloc lost steam and the largest, Germany, contracted thanks to a global slowdown driven by trade conflicts and uncertainty over Brexit, agency reports.

Eurostat said that gross domestic product (GDP) growth in the 19-country Euro zone was 0.2% in the second quarter compared with the previous quarter, a slowdown from 0.4% percent growth in the first three months of the year.
The GDP flash estimates numbers, including year-on-year growth of 1.1% from the second quarter of 2019, were in line with economists' forecasts.

Earlier on Wednesday, Germany's Federal Statistics Office said that, pn a calendar-adjusted basis, the annual growth rate in Europe's largest economy slowed to 0.4% in the second quarter from 0.9% in the first. Industrial production in the euro zone area fell by 1.6% in June compared with the previous month, and by 2.6% from the same month in 2018. Economists had predicted less sharp drops in output of 1.4% month-on-month and 1.2% year-on-year. Meanwhile, the German economy shrank by 0.1 percent in the second quarter as global trade conflicts and troubles in the auto industry weighed on Europe's largest economy.

 The German economy shrank by 0.1 percent in the second quarter from the previous quarter as global trade conflicts and troubles in the auto industry weighed on Europe's largest economy. The state statistics agency Destatis said Wednesday that falling exports had held back output while demand from consumers and government spending at home had supported the economy. In comparison to the same quarter a year ago, the economy grew 0.4 percent, agency reports.

 Germany's economy is facing headwinds as its auto industry, a key employer and pillar of growth, faces challenges adjusting to tougher emissions standards in Europe and China and to technological change, while uncertainty over the terms of Britain's planned exit from the EU has weighed on confidence. British Prime Minister Boris Johnson has said his country will leave Oct. 31, with or without a divorce deal to smooth trade. Analyst Carsten Brzeski at ING said that trade conflicts and the struggling automotive sector were key reasons why output had fallen.

``Increased uncertainty, rather than direct effects from trade conflicts, has dented sentiment and hence economic activity,'' Brzeski wrote in an emailed research note.U.S. President Donald Trump has imposed new tariffs on Chinese goods while seeking a broader trader agreement and has indicated he may impose import tariffs on autos that would hit European manufacturers. Uncertainty over the outcome of those talks and what the future trading regime will look like among the US, China and Europe has weighed on business optimism, deterring business spending and investment.

That comes on top of structural change in the auto industry, where tightening emissions regulations in Europe and China and digital technologies are pushing automakers to make heavy investments in battery-powered cars and smartphone-based services, with uncertain payoff.