The French economy has ground to a halt in the second quarter of the year reporting zero growth. This is according to the statistics bureau INSEE which released its latest report on Friday.
And the economy of Angela Merkel's Germany has fallen into a "summer slump", with business confidence in the country dropping sharply, news outlets reported.
The hope of an economic recovery in France because of the encouraging first quarter results, has given away to disappointment following the release of the latest figures.
Economist Jean Joseph Boillot said that though earlier there was some expectation of recovery, it hasn’t been the case due to lack of investment and consumption.
The figures show that consumer spending stagnated while investment in both the public and the private sector dropped. Oil refinery strikes in May and June weighed on overall production, which dropped 0.2%, and the construction sector also weakened.
Despite these gloomy figures, the French Ministry of Finance said that it stood by its own growth forecast of 1.5% for the full year 2016.
According to Boillot, the government has been saying that things are get better. “However, nothing is on the right track as far as unemployment figures are concerned. There has been no new investment. And you have to take into account the agriculture sector as well. The yield of wheat dropped by half because of bad climatic conditions last summer. All this adds to the economic depression,” he told RFI.
He added that the looming recession will hit not only France but the whole of Europe. “There has been a negative impact of Brexit. We have this situation in France. You have heard of the bad banking situation in Italy and Spain hasn’t clearly recovered,” he said.
The latest official numbers for Europe show that growth in the eurozone halved in the second quarter.
The Eurostat statistics agency said economic growth in the 19-nation single currency bloc slowed to 0.3% in the April to June period, with stagnation in France largely contributing to the poor data.
This was down from a far more robust expansion of 0.6% in the previous quarter, though analysts had said that result was due to a warm winter in Europe.
The closely-watched purchasing managers’ index–a survey of French private sector activity–suggested output rose at the fastest pace for 10 months in August, supported by the country’s services sector. But the latest PMI, published earlier this week, showed French manufacturers are continuing to suffer.
Household spending in France was flat in the second quarter and business investment fell as the country failed to benefit from the Euro 2016 football tournament.
German Slump
The German economy is struggling as the country is hit by a 'summer slump'.
It comes just days after the so-called flash purchasing managers index for the eurozone suggested the bloc's economy may have shrugged off the effect of the poll.
The gauge from influential German think-tank Ifo stated that there had been a "clear worsening" of the business climate, with its index dropping from 108.3 points in July to 106.2 points in August.
"Both the current business situation and the expectations for the next six months were assessed more poorly by the companies than in the previous month," said Clemens Fuest, Ifo Institute president.
"The German economy has fallen into a summer slump."
It comes as industry figures show that retail sales in the UK were the strongest in six months in August, boosted in part by the summer.
But the Confederation of British Industry, which produced the data, said sales volumes look set to be broadly flat over the coming month.
Its retail sales volume index rose to +9, its highest since February, from -14 in July.
A separate index measuring corporate expectations in Europe's biggest economy over a six-month horizon fell to 100.1. This was the lowest since October 2014.
