Euro-Zone 2Q GDP In-Line With Expectations, Producer Prices Fall At Record Pace

Economic activity in the Euro-Zone slipped 0.1% in the second quarter to match the advanced reading from the previous month, while the annual rate of growth plunged 4.7% from the first three-months of the year amid an initial forecast for a 4.6% contraction. The GDP reading has contracted for five consecutive quarters to mark the longest contracted since record keeping started 14 years ago however, economic activity is likely to fall at a slower pace throughout the second-half of the year as policy makers take unprecedented steps to steer the region out of recession. The breakdown of the report showed private spending for the first time in more than a year with household consumption increasing 0.2 percent from the previous quarter, while business investments slipped 1.3% from the first quarter amid expectations for a 1.7% drop. At the same time, producer prices fell at an annual rate of 8.5% in July to mark the biggest decline since the series began in 1981, while the index slipped 0.8% from June amid forecasts for a 0.6% decline. As growth prospects remain subdued, the European Central Bank is widely expected to hold the benchmark interest rate at 1.00% and is likely to maintain its EUR 60B in covered bond purchases at the policy meeting tomorrow in an effort to stem the downside risks for growth and inflation.

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