August 15, 2007	Wednesday	Sha’aban 1, 1428

BRUSSELS, Aug 14: The European Union and its member states released a raft of disappointing economic growth figures on Tuesday, just as investors were seeking good news in the maelstrom of the financial markets.

Gross domestic product (GDP) growth in the 13-nation eurozone slowed to a lower-than-expected 0.3 per cent in the second quarter, compared with 0.7 per cent in the previous three months, official EU figures showed. Those figures represent the least robust pace since late 2004.

In the 27-nation European Union as a whole, GDP growth was up by 0.5pc from April-June, also down on the 0.7pc rise registered in the first quarter.

The figures were “slightly down on the projections but nevertheless still at a very, very good level,” a European Commission spokesman said.

However a Royal Bank of Scotland (RBS) report called that figures “a clear signal that the strength of the recovery remains questionable.”

Economic growth over 12 months was 2.5pc in the eurozone and 2.8pc throughout the EU, compared to 3.1pc and 3.3pc respectively the previous quarter, according to the figures produced by Eurostat, the EU’s statistical office.

Eurostat figures also showed that eurozone industrial production was actually down by 0.1pc in June compared to May.

While the second quarter figures pre-date the current market turmoil induced by the US home loan sector crisis, they were unlikely to boost market sentiment.

Last week’s events on the world stock markets are “a clear reminder” of the powerful links between the eurozone economy and the rest of the world, the RBS said.

“Today's GDP and industrial numbers are disappointing in that they demonstrate once again that the region has not been able to grow for long independently of major trading partners,” the report added.

Howard Archer, chief European economist with analysts Global Insight, saw different factors weighing on growth in individual EU nations.

For example, German expansion was hit by a contraction in construction investment and sluggish consumer spending, while French activity suffered from a sharp loss of momentum in business investment and markedly negative net trade.

Earlier in the day individual EU member states published their national GDP figures.

The German and French economies both expanded by a lower-than-expected 0.3pc in the second quarter.

The growth rate in Germany, the EU’s biggest economy, was the lowest since 2005 amid a construction slowdown, and for France it was the weakest growth since 2003.

“The French economy is not doing well. It needs an electric-shock treatment,” Nicolas Bouzou at Asteres opined.

Dutch and Hungarian economic growth fell to just 0.2pc in the second quarter. The rate was higher (0.8pc) though still falling in Spain.

The latest EU figures, though a first estimate, were down on analysts’ predictions of a 0.6pc economic growth rise in the eurozone during the second quarter and 2.6pc growth over a year.

Britain and France also logged lower inflation rates, with French inflation standing at 1.1pc in July and Britain’s 12-month inflation rate marking its biggest fall in over five years to 1.9pc.

With world markets in turmoil, the EU executive arm’s economic and financial affairs department slightly lowered its eurozone economic growth estimates to 0.3-0.8pc growth in the third quarter of 2007 and 0.2-0.8pc in the final quarter.—AFP