European Economy Slows, Raising Expectations of E.C.B. Action

Nytimes

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31 Juli 2019 12:03

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Economic growth in countries that use the euro slowed considerably in the second quarter, adding to pressure on the European Central Bank to intercede to prevent a possible recession.

The economies in the eurozone countries grew by 0.2 percent over the preceding quarter, half the 0.4 percent growth rate posted in the first three months of the year, according to Eurostat, the European statistical agency. On an annual basis, the economy rose 1.1 percent from the same quarter a year ago.

“This highlights that the slowdown in Europe is substantial,” said Ángel Talavera, an economist at Oxford Economics, a market research firm, who described the numbers as “weak” though “expected.”

On another worrisome front, inflation remained tepid in July at 1.1 percent, down from 1.3 percent in June, Eurostat reported. That number is well below the central bank’s target of close to 2 percent.

Wednesday’s report came on the same day that Federal Reserve policymakers in Washington, concerned over signs that the United States economy’s long boom may be coming to an end, are expected to announce a cut in the central bank’s benchmark interest rate.

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Mr. Talavera and other analysts said that the trade wars waged by the Trump administration were weighing on the European economy, and especially on countries like Germany and Italy that are heavily dependent on exports. Last week a survey of business sentiment in Germany showed the biggest decline since early 2009.

The increasing likelihood that Britain will leave the European Union in a disorderly way is also probably a source of uncertainty for businesses on the Continent, said Holger Schmieding, an economist at Berenberg, a German bank.

The European Central Bank has grown increasingly concerned about the chances of Europe entering a recession, and last week it said it was reviewing ways to revive the slowing economy, perhaps as early as September.

The slowing economic growth and sagging inflation are expected to bolster policymakers at the central bank pushing for a new asset buying program when they meet in September.

“The E.C.B. is going to come out with guns blazing,” Mr. Talavera said.

There was some positive news on the employment front. In June, the unemployment rate in the 19 countries that use the euro fell to 7.5 percent, down from 7.6 percent in May and the lowest level recorded since July 2008.

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