Growth in the eurozone unexpectedly eased in the second quarter, despite rising consumer spending in France and stronger exports in Germany, putting a question mark over the speed of economic revival.
Gross domestic product in the 12-nation currency area grew by 0.5 percent in the second quarter, compared with expectations of 0.6 percent, the first estimate of European Union statistics office Eurostat showed on Friday.
The figures suggested corporate investment was slow to take root and consumers in many countries were shying away from shops, analysts said, with some predicting that the eurozone's growth may have already peaked.
"With the slowdown now under way in the global economy, it puts a question mark over how fast eurozone growth is going to be," said Trevor Williams, chief economist as Lloyds TSB.
The European Commission forecast on Friday the eurozone economy would grow by between 0.3 and 0.7 percent in the third quarter of 2004, unchanged from a previous estimate, and again by 0.3-0.7 percent in the fourth quarter.
Eurostat said that the single currency area's GDP, the value of all goods and services, rose by 2.0 percent year-on-year, compared with 1.3 percent in the first quarter. However, the quarter-on-quarter growth rate slowed from 0.6 percent in January-March.The 2.0 percent growth figure is significantly less than the corresponding annualised second quarter 3.0 percent rate in the United States.
Analysts had hoped for a fast growth after France reported a second consecutive quarterly expansion of 0.8 percent in April-June, powered by a revival in consumer spending - a rare phenomenon in Europe this days.
Germany's acceleration to 0.5 percent from 0.4 percent in the first quarter, fuelled mainly be exports, was encouraging as well. It was the country's fastest expansion in 3 years.
But an unexpected 0.2 percent contraction in the Netherlands and weak performance in Greece and Italy appeared to have dragged the euro zone figure down, analysts said.
The forex market showed little reaction to the data, as they came just below market expectations, hard on the heels of figures from several national statistics offices.
Some economists have warned that the second half of 2004 could see a deceleration of quarterly growth, due to the slowing world economy partly caused by high oil prices.
"The rate of GDP may not accelerate in quarterly terms from what we have now. Going into 2005 we expect a slowing global growth scenario unless the labour market shows a better performance," said Edward Teather, European Economist at UBS.
The eurozone's unemployment rate remained at nine percent in June for the second consecutive month, cooling down consumer spending.
Analysts said the slowdown backed expectations that the European Central Bank would keep its rates unchanged this year.
"What this suggests for rates is that the ECB will remain on hold for this year and may well be unlikely to raise rates until the end of the second quarter of next year and possibly may not raise rates at all in 2005," said Lloyd's Williams.
The International Monetary Fund forecasts eurozone growth at 2.0 percent this year, compared with 3.5 percent for the United States.