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Investment stalls, but Euro region exports grows 0.5pc, GDP up 0.3pc

DOMESTIC spending slowed in the second quarter in the Euro region, but a surge in exports drove economic growth, according to data published by the European Union's statistics office in Luxembourg.

The figures showed that exports made the biggest contribution to growth, adding 0.5 percentage point while investment stalled with a slowdown in private and government consumption.

Gross domestic product increased 0.3 per cent from previous quarter, when it rose 0.5 per cent, in line with August 12 estimate, according to Bloomberg.

The European Central Bank has built its projections for a continued recovery on domestic demand, with rising employment bolstering consumption and investment set to benefit from more favourable lending conditions.

The data show how political uncertainty - the Brexit threat loomed over companies in the second quarter - can harm economic growth.

"It's not a sign of strength that trade contributed so much to growth, it's actually a sign of weakness," said Aline Schuiling, senior economist at ABN Amro Bank in Amsterdam.

"Political uncertainty is just not good for the investment climate. Domestic demand was weak, so imports were weak. The picture is one of very moderate growth moving forward."

The statistics also showed that private consumption rose 0.2 per cent, contributing 0.1 percentage point to growth while government spending increased 0.1 per cent. Exports surged 1.1 per cent, most since second quarter of 2015, while imports gained 0.4 per cent.

Slovakia was fastest-growing euro-area economy in the second quarter, with GDP expanding 0.9 per cent. French, Italian, Finnish economies stagnated in three months through June.