Germany, France Economies Slow as Analysts Look to Eurozone Recession

Europe's core economies slowed in the second quarter of the year, but a mild surprise in Germany's GDP growth may not be enough keep the Eurozone from slipping into recession.

Europe's largest economy expanded at a 0.3 percent clip, according to figures from Germany's Federal Statistic Office, slower than that 0.5 percent pace recorded in the three months ending in March but slightly better than analysts had forecast. Data released in France also showed a marked slowdown in growth at the worst of the sovereign debt crisis bite hard into demand. Europe's second-largest economy registered no growth at all for the third consecutive quarter.

"Although the pace of growth slowed compared to (the first quarter) the outcome was slightly better than expected," said Barclays' economist Thomas Harjes in a research note to clients. "However, the risk of another soft patch in H2 2012 is significant as most parts of Southern Europe remain in recession and overseas demand has also softened lately."#

Germany's FSO typically releases a more detailed analysis of its figures several days after the first publication, but it did remark Tuesday that stronger exports and private domestic consumption offset weaker industrial investment during the three month period.

Eurozone GDP figures will be released later Tuesday by the European Union's statistics office. Economists are expecting a 0.2 percent contraction.

German bund futures fell around 43 ticks to 142.75 while benchmark 10-year bond yields rose 2 basis points, or 0.02 percent, to 1.431 percent. The European single currency was little changed at 1.2358 against the US dollar.