The German economy contracted more-than-expected in the second quarter on weaker exports and investment, while France stagnated for the second straight time, forcing the government to discard its 2014 deficit target.
Germany's gross domestic product fell 0.2 percent sequentially, after expanding by a revised 0.7 percent in the first quarter, preliminary figures from Destatis showed Thursday.
This was the first decline since the first quarter of 2013 and was deeper than the 0.1 percent fall forecast by economists.
Elsewhere, French GDP remained flat in the second quarter, preliminary data from Insee showed today. Economists had forecast the economy to grow 0.1 percent after staying steady in the first quarter.
The GDP figure was also below the Bank of France's 0.2 percent growth projection. Earlier last month, Bundesbank had said it expects the German GDP to stall in the second quarter, as geopolitical concerns dragged industrial production.
On a yearly basis, the price-adjusted German GDP was up by 0.8 percent from the prior year versus a 2.5 percent expansion in the first quarter. Likewise, calendar-adjusted GDP growth slowed to 1.2 percent from 2.3 percent. The growth was also slower than the 1.4 percent rise forecast by economists.
As exports rose at a slower rate than the imports, the trade balance had a negative effect on the German economic development. Capital formation, especially in construction, fell significantly from the first quarter.
However, both households and government consumed slightly more than in the previous quarter, Destatis said. More detailed results will be released on September 1.
The Federal Ministry for Economic Affairs and Energy on Tuesday said the uncertainties emanating from Ukraine and the Middle East would moderate the German economic momentum in the second quarter.
Meanwhile, the International Monetary Fund expects the German economy to expand 1.9 percent this year and grow by 1.7 percent the next year. At the same time, the French economy is seen growing 0.7 percent in 2014 and 1.4 percent in 2015.
The French economy would grow by only around 0.5 percent this year, suggesting that the public deficit would top 4 percent of GDP and miss its 3.8 percent target, French Finance Minister Michel Sapin told French daily Le Monde.
On the expenditure front, French household consumption expenditure rose 0.5 percent in the second quarter, offsetting the 0.5 percent fall a quarter ago, while total gross fixed capital formation declined 1.1 percent following 1 percent drop.
Exports remained unchanged on quarter and imports gained 0.4 percent. As a result, the foreign trade balance contributed minus 0.1 points to GDP. Similarly, changes in inventories contributed minus 0.1 points.
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