Euro zone economic growth slows in Q2 as France, Italy stall

BRUSSELS (Reuters) - Economic stagnation in France and Italy contributed to a slowdown in growth in the euro zone from April to June after a strong performance in the first three months of the year, estimates showed on Friday.

Gross domestic product in the 19-country currency bloc expanded 0.3 percent in the second quarter from the first and was up 1.6 percent compared with the same quarter last year, statistics agency Eurostat said, confirming market expectations and its own initial data issued in late July.

The quarterly rate of growth halved from January-March's 0.6 percent expansion, while the annual rate of growth was only marginally slower than the first quarter's 1.7 percent.

The slowdown was mainly due to France and Italy reporting no growth in the quarter, offsetting relatively robust readings for Spain and the Netherlands of 0.7 percent and 0.6 percent respectively.

Italy's standstill was below the expected 0.2 percent growth and adds to the woes of Prime Minister Matteo Renzi, who in autumn faces a constitutional referendum on which he has staked his job.

Growth in Germany, the bloc's biggest economy, slowed to 0.4 percent in the second quarter from 0.7 percent in the first, but that was better than the 0.2 percent consensus forecast of economists polled by Reuters.

"Today's German and Dutch flash GDP estimates surprised to the upside, more than offsetting a flat GDP print in Italy," Marco Protopapa, economist at JPMorgan, said in a note.

The stronger-than-expected German data helped the bloc as a whole avoid a downward revision from Eurostat's preliminary estimates for the quarter, as some economists had feared.

"The fact that Q2's growth rate was not revised down from the 'preliminary flash' estimate of +0.3 percent was something of a relief after the additional national data released earlier this morning," said Jonathan Loynes of Capital Economics.

The euro zone's smaller economies fared well. Belgium's GDP grew 0.5 percent on the quarter, faster than the 0.2 percent rise in the first three months of the year.

Greece emerged from a mild recession in the first quarter, posting 0.3 percent growth in the April-June period.

The European Union economy grew slightly faster than that of the euro zone, expanding 0.4 percent on the quarter and 1.8 percent compared with the same period last year.

(Reporting by Francesco Guarascio; Editing by Foo Yun Chee and Hugh Lawson)