ECONOMY

Economic growth slows in 2nd quarter

Greece’s economy expanded at a slower pace in the second quarter compared to the first three months of 2007 but continued to outpace the eurozone, driven by investments and exports, data showed yesterday. Flash estimates by the national Statistics Service (NSS) showed GDP grew 4.2 percent year-on-year, its slowest pace in four quarters but in line with economists’ forecasts, decelerating from a 4.6 percent pace in the first quarter. «The main reason behind this quarter’s growth is the slowdown in imports and the sustained rise in exports. Consumption and investments are growing steadily at a very satisfactory pace,» said Alpha Bank economist Dimitris Maroulis. «This quarter’s slowdown in economic growth is mainly due to a deceleration in public investments which started earlier this year because of better weather conditions,» he said. «All in, investment spending averages out at a satisfactory rate in the first half.» The government, which has projected GDP growth of 3.9 percent this year, is likely to see economic activity exceed the target. Economic growth in the first half averages out at a 4.4 percent annual rate. Consumption continued to grow, maintaining the previous quarter’s 2.8 percent clip, fueled by sustained household borrowing to buy property and consumer goods. Based on the latest Bank of Greece data, credit to households expanded 24.4 percent year-on-year in May. Investments rose 4.9 percent, slowing markedly from a 15 percent growth rate in the first quarter, which was the strongest pace since the second quarter of 2006. (Reuters) Italy Q2 slowdown raises eurozone doubts ROME (Reuters) – Italy’s economy was much weaker than expected in the second quarter, raising doubts over prospects for the eurozone and giving the European Central Bank more food for thought as it grapples with a credit squeeze. Italian gross domestic product rose just 0.1 percent from the previous three months after a 0.3 percent rise in the first quarter, data showed yesterday. Italy is the first large eurozone country to report second-quarter GDP and the data were below all forecasts in a Reuters survey of 29 analysts. The economy grew 1.8 percent year-on-year, slowing from 2.3 percent in the previous quarter. The poll’s mid-point forecast projected a quarterly rise of 0.4 percent and a 2.1 percent increase on the year. BNP Paribas economist Luigi Speranza said he had cut his forecast for eurozone second-quarter growth to 0.5 percent from 0.6 percent on the back of Italy’s data and recent indications of softening activity in France and Germany, Italy’s larger eurozone peers. «We will probably see a pickup in third -quarter growth in Italy but nothing very dramatic. Growth has peaked both in Italy and the eurozone,» said Speranza. «This data in itself won’t deter the ECB from hiking rates in September, but with the market turbulence, the euro strength, weaker forward indicators and an uncertain outlook in the US, I think there is every case for them stopping to pause after reaching 4.25 percent,» he added.