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Euro zone growth slows; Greek economy...expands?

Flash euro zone gross domestic product (GDP) data on Friday showed that the region's economy grew 0.3 percent in the second quarter on the previous three months, narrowly missing analysts' forecasts.

Analysts polled by Reuters had forecast a gain of 0.4 percent, the same as seen in the first quarter of 2015—the fastest growth rate seen in almost two years.

Seasonally-adjusted GDP rose by 1.2 percent between April and June on the same quarter last year, compared with 1.0 percent in the first quarter.

A view of the cargo terminal of the Piraeus port near in Athens, Greece.
Andreas Solaro | AFP | Getty Images
A view of the cargo terminal of the Piraeus port near in Athens, Greece.

Figures 'flatter' Greece?

Greece released its data on Thursday, which showed the economy grew 0.8 percent in the second quarter—despite posting zero growth between January and March and shrinking during the last three months of 2014.

The country is currently mired in talks about a potential third bailout, which have proved contentious both within the ruling Syriza party and in the broader euro zone.

Greece's figures could be deceptive however, said economists at Daiwa Capital Markets, with the focus on real GDP (which is adjusted for inflation) disguising the country's economic straits.

"These real GDP data flattered the underlying position—in nominal terms, GDP declined 0.7 percent quarter on quarter (in Greece) in the second quarter," said Daiwa's Emily Nicol and Mantas Vanagas in a research note.

Furthermore, the data for July to September could show a worse story.

"With capital controls having been implemented at the end of June, we would expect the economy to have been hit hard at the start of third quarter," Nicol and Vanagas said.

Germany disappoints; Finland shrinks

Separate data releases from France and Germany failed to meet expectations on Friday.

Preliminary data from Germany's federal statistics office showed the economy grew 0.4 percent in the second quarter, from the previous three months, aided by a weak euro and positive export growth. It failed to match up to expectations for 0.5 percent growth by analysts polled by Reuters.

Meanwhile, French GDP data for the same time period showed the economy slowed to a standstill, missing expectations of 0.2 percent growth from analysts.

Interestingly, the only country that shrunk the second quarter was Finland. Its economy declined by 0.4 percent between April and June, continuing a recession that has seen the Nordic country shrink annually since 2012.

Jennifer McKeown, senior European economist at Capital Economics, said the outlook for the euro zone was mixed.

"Looking ahead, business surveys suggest that the euro-zone economy will continue to expand, led by strong growth in Spain and a solid German economy. But they offer little hope that the recovery will gain pace. Indeed, we think it is more likely that growth in the region as a whole will slow further in the second half of the year," she warned in a research note on Friday.

The mixed outlook underlined the need for the European Central Bank to maintain "and perhaps extend" its quantitative easing program, she added.

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