(Adds German inflation data, analyst)
* German inflation hits lowest since November 2016
* French GDP growth slows unexpectedly in second quarter
* German consumer morale adds to bleak growth outlook
* EZ sentiment hits lowest in more than three years
* Read-out gives weight to calls for more stimulusBy Leigh Thomas and Michael NienaberPARIS/BERLIN, July 30 (Reuters) - A series of weak economicdata from France, Germany and the euro zone as a whole onTuesday painted a meagre growth outlook for the single currencybloc, lending support to doves among ECB policymakers who favourmore rate cuts and bond buys.French growth slowed unexpectedly in the second quarter onweaker household spending and German consumer morale worsenedfor the third month in a row heading into August, adding tosigns that the euro zone economy as a whole is cooling.The lacklustre read-out of data from the currency bloc's twobiggest economies backs European Central Bank President MarioDraghi's assessment that the growth outlook is deteriorating andthe bank should inject more monetary stimulus. In a further sign of economic weakness, German consumerprice inflation, harmonized to make it comparable with othereuro zone figures, eased to 1.1% in July from 1.5% in theprevious month, preliminary data showed. This undershot a Reuters forecast of 1.3% and was the lowestsince November 2016. It also marked the third month in a rowthat German inflation remained well below the ECB's target levelof close to but below 2% for the euro zone as a whole."Consumers cheer, savers cry. Mario Draghi will definitelynot raise interest rates during his term of office," KfWeconomist Sebastian Wanke said.Draghi's term as ECB president is due to end on Oct. 31 andIMF chief Christine Lagarde has been nominated to succeed him.
SOONER THAN LATERAdding to the clouded outlook, euro zone economic sentimentdeteriorated to hit its lowest level in more than three years inJuly, European Commission data showed on Tuesday. "This adds to evidence ... that the euro zone economy willexpand by a meagre 1% or so this year, strengthening the casefor ECB action sooner rather than later," said Melanie Debonofrom Capital Economics.The French economy grew 0.2% in the April-June period, downfrom 0.3% in the previous three months, according to preliminarydata from the INSEE statistics agency.That was just below a Reuters poll of 28 economists, whichhad an average estimate of 0.3%. Until now the French economy has proven more resilient thansome neighbours such as Germany because it is less dependent onexports and thus less exposed to global swings.But household spending, the traditional motor of Frenchgrowth, grew only 0.2%, the slowest rate in a year despite amore than 10 billion euro ($11.1 billion) package of measureslaunched by President Emmanuel Macron to boost purchasing power.
RECESSION FEARSIn Germany, the economy is widely expected to havecontracted in the second quarter and sentiment surveys suggestthe third quarter might not bring any improvement, raising thespectre of a technical recession in Europe's largest economy.The GfK consumer sentiment indicator, based on a survey ofabout 2,000 Germans, edged down to 9.7 from 9.8 a month earlier.It was the lowest reading since April 2017. As German exporters are hit by trade disputes and Brexituncertainty, household spending and construction have becomeimportant drivers of growth. Domestic demand is boosted byrecord-high employment, above-inflation pay increases and lowborrowing costs.But the continued drop in consumer confidence signals that aslump in Germany's export-dependent manufacturing is nowcreeping into other sectors of the economy as employees arebecoming afraid that they could soon lose their jobs."The trade war with the United States, ongoing Brexitdiscussions and the global economic slowdown continue to drivefears of a recession," GfK researcher Rolf Buerkl said.Consumers with jobs in export-driven sectors in particular,such as the car industry and their suppliers, are affected themost, he said. The propensity to buy as measured by the GfK alsodeteriorated to reach its lowest in nearly four years."The primary threat to consumer confidence is thepersistently increasing fear of job losses," Buerkl said. Hewarned that household spending could weaken in coming months ifthe trend continues. (Writing by Michael NienaberEditing by Andrew Cawthorne and Peter Graff)
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