- Philippe Gudin de Vallerin, chief European economist at Barclays
Germany, which is still considered to be the engine of economic growth in Europe, continues to disappoint markets and fuelling slowdown fears. German industrial production increased slightly 0.3% on month in June, shy of expectations for a 1.3% gain, sparking fears that Europe's number one economy may have slowed in the second quarter. The disappointing output number comes a day after data showed industrial orders declined in June at the steepest pace since September 2011. The German economy expanded at its strongest rate in three years in the three months through March, largely owing to mild weather, and it is expected to slow or even stall in the second quarter before accelerating again by the end of the year. However, the strength of the growth in the second half of 2014 is questioned amid new round of sanctions on Russia introduced by the EU and U.S.
Meanwhile, the ECB kept the benchmark interest rate at 0.15%, a widely expected outcome, after cutting it from 0.25% in June. After launching unprecedented stimulus measures, which Draghi believes have been successful, in the beginning of summer to underpin economic growth in the region, the central bank reiterated that it will maintain rates low as the ECB expects the recovery in the Euro zone will be moderate and uneven, especially in light of the geopolitical crisis in Ukraine, which has cast a shadow over the region's fragile recovery.
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