The eurozone economy shrank in the second quarter of the year after Germany and Italy fell into recession. GDP in the 12 nations that share the euro decreased by 0.1pc in the three months to June, EU statistics office Eurostat said today, after growing just 0.1pc in the first quarter. On a year-on-year basis, the economy expanded by 0.2pc. In the EU as a whole, GDP was flat sequentially and up 0.5pc on the year. The contraction in the eurozone compares to annualised growth of 3.1pc in the US over the same period. The weak performance was in part due to a sharp slowdown in household spending despite an apparent rise in consumer confidence following the war in Iraq and the SARS scare.
Household final consumption grew by 0.1pc in the eurozone and by 0.3pc in the EU15, Eurostat said, down from 0.5pc and 0.4pc, respectively, in the first quarter. The euro remains stronger against the dollar this morning despite the weak economic news, as it was largely expected. At 1115, the euro was worth USD1.1129, up 0.6pc. The ECB expects growth to improve later this year, it said last week, although it warned that downside risks to growth have "have not disappeared". //www.fxcentre.com