Euro-Area Pickup Stalls as Big Economies Fail to Grow.

http://www.bloomberg.com/news/2014-08-14/euro-region-recovery-stalls-as-biggest-economies-fail-to-expand.html

The euro area’s recovery unexpectedly stalled in the second quarter as its three biggest economies failed to grow, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine.

Gross domestic product in the three months through June was unchanged from the first quarter, when it increased 0.2 percent,Eurostat, the European Union’s statistics office in Luxembourg, said today. The median of 37 forecasts in a Bloomberg News survey was for growth of 0.1 percent. In a separate report, the agency confirmed inflation at 0.4 percent in July.

Economic stagnation, consumer-price growth at less than a quarter of the European Central Bank’s goal and escalating international sanctions against Russia over its support for rebels in Ukraine highlight the challenges policy makers face. ECB President Mario Draghi committed last week to build on the unprecedented stimulus unveiled in June if the outlook deteriorates.

“With the geopolitical tensions not cooling down for the time being, there is little likelihood that the growth pace will accelerate in the second half of the year,” said Peter Vanden Houte, chief euro-area economist at ING Groep in Brussels. Yet, the ECB is likely to “stand pat for the remainder of the year. Big decisions on more unconventional policy measures will have to await 2015,” he said.

Unconventional Policy

GDP data come two months after the ECB resorted to targeted long-term loans and a negative deposit rate to bolster growth, lending and inflation. Consumer prices rose 0.4 percent in July from a year earlier, compared with policy makers’ goal of just under 2 percent.

The ECB predicted in June that the euro-area economy would expand 1 percent this year and 1.7 percent in 2015. Last week, Draghi said risks to the outlook are increasing because of conflicts such as the Ukraine crisis, and held out the prospect of new unconventional tools such as purchases of asset-backed securities and large-scale quantitative easing. New forecasts are due next month.

“There’s a big chance they will have to revise their growth and inflation figures in September,” saidThomas Harjes, senior European economist at Barclays Plc in Frankfurt. “The ECB is in a tough position” and today’s data “certainly raise the pressure again” to increase stimulus, he said.