|09-05-2014, 02:14 PM||#1|
Eurozone growth `stable` in second quarter as Draghi welcomes further easing
The euro area economy stagnated in the second quarter this year, prompting policymakers at the European Central Bank to take further action to support the crispy recovery.
As expected, Gross Domestic Product was "stable" and unrevised at 0.0% for the three months ending June, according to a preliminary estimates released by the European Union`s statisitical office. In the first quarter of 2014, the GDP grew by 0.2%. From a year ago, annual GDP growth confirmed the flash estiamte at 0.7%, compared with 1.0% annual growth in the first quarter of 2014.
Policy makers fell under heavy pressure to move ahead with measures to bolster the economy, especially after Germany`s economy contracted in the second quarter after a robuust start to the year.
Accrording to the Eurostat, the euro memebrs leading the slowdown in GDP were Romania, Denmark Cyprus and of course Germany and Italy.
Taking a look at second-quarter GDP components (Preliminary, Flash ):
- Gross fixed capital formation - 0.3% vs. 0.3
- Government Expenditures 0.2% vs. 0.3%
- Household final consumption 0.3% vs. 0.1
Falling investment was definitely behind the stagnant economy in the euro area. Gross fixed capital formation had a negative contribution to the GDP, falling for the first time since the start of 2013 and erasing 0.1% of national output. On the other hand, Household final consumption expenditure had a positive contribution, adding 0.2% to the headline figure.
Exports rose by 0.5% compared with 0.1% growth in the first quarter of the year. Imports also increased by 0.3% compared with the previous gains of 0.8%.
The fragile economy needed quick help by the ECB, acting yesterday before it`s too late in order to shore up the fragile euro amid rising geopolitical risks from the peripherals as inflation rates continues to hit rock bottoms across the region.
European Central Bank President Mario Draghi warned of further downside risks to the euro economy, as the bank surprisingly cut interest rates yesterday and said it will start buying asset backed securities and covered bonds next month.
Speaking at ECB`s monthly press conference in Frankfurt, Draghi said the bank has lowered its 2014 forecast for euro zone growth and inflation, but kept its medium-term outlook for consumer prices subdued.
The EUR/USD traded around 1.2940, few pips away from the 14-month low hit yesterday.
The European markets traded in the red territory following the GDP annoucement, still in shock by the ECB`s surprise decision apaprently, with the Stoxx 600 pushing slightly lower around 374.54 as of 05:40 am ET.
- Britian`s FTSE 100 fell around 6,854.70
- France`s CAC 40 index fell to 4,488.23
- Germany`s DAX 30 index fell to 9,719.07
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