Euro zone second quarter growth revised upward but June industry output plunges

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[August 14, 2018]  BRUSSELS (Reuters) - Euro zone growth was better than expected in the second quarter, flash estimates from the European statistics office Eurostat showed on Tuesday, in a sign that the negative effect of global trade tensions might be seen only later in the year.

A worker grinds metal at the machine-building company Zemmler Siebanlagen in Massen, Germany, March 22, 2018. REUTERS/Hannibal Hanschke/File Photo

While the economy expanded by 0.4 percent in the second quarter, above expectations of 0.3 percent growth, industrial output in the in 19-country currency bloc fell sharply in June driven by a collapse in machinery and equipment investment, Eurostat said in a separate release on Tuesday.

Eurostat's flash estimate of a 0.4 percent growth on the quarter was higher than its previous estimate of 0.3 percent growth. The agency also revised up the year-on-year growth to 2.2 percent from its previous 2.1 percent estimate.

Economists polled by Reuters had expected a 0.3 percent quarterly expansion and a 2.1 percent year-on-year rise.

Eurostat's upward revision comes after Germany, the bloc's largest economy, recorded a better-than-expected 0.5 percent expansion in the second quarter, driven by consumption and state spending that could signal the beginning of a shift from Germany's export-led economic model.

But in a separate release, Eurostat said on Tuesday the bloc's industrial output fell by 0.7 percent in June on the month, recording a larger drop than expected by economists polled by Reuters who had forecast a 0.4 percent fall.

Germany's monthly output was down by 0.6 percent in June after a 2.4 percent growth in May, Eurostat said.

The euro zone's highly volatile industrial production had expanded by 1.4 percent in May, Eurostat said, revising up its previous estimate of 1.3 percent growth.

The production plunge was mostly driven by a 2.9 percent drop in the output of capital goods, like machinery, in a sign that firms may be preparing for slower growth in the coming months.

The output of consumer and intermediate goods also fell, while the production of energy increased by 0.5 percent from May.

On the year, industry output was up by 2.5 percent in June, and the May figure was revised up to 2.6 percent from a previous estimate of a 2.4 percent increase.

(Reporting by Francesco Guarascio; editing by Robert-Jan Bartunek)

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