Italy enjoyed its best growth in 2006 for many years

The minimal increase was below market expectations and represented a drop-off from the first quarter's 0.3% rise.

Separately, France saw a 0.5% decline in industrial output in June due to a fall in car and agriculture production.

German industrial output also shrank in June, suggesting overall growth in both countries may have suffered.

Lagging behind

Germany and France will publish details of their second quarter performances on 14 August.

The Italian economy has lagged behind most of its eurozone counterparts in recent years, although last year's performance was its best since 2000.

The data is slightly worse than we expected Chiara Corsa, Unicredit

Analysts had forecast a 0.4% increase in GDP between April and June.

On an annual basis, the economy expanded 1.8% during the period, compared with 2.3% for the previous three months.

"The data is slightly worse than we expected," said Chiara Corsa, an analyst at Unicredit, but added that she expected the economy to pick up in the second half of the year.

Italian ministers are currently forecasting annual growth of 2% in 2007, a marginal improvement on last year's 1.9% increase.

'Disappointment'

French industrial output was hit by lower production of cars and foodstuffs, although manufacturing of consumer goods rose.

The disappointing figures were compounded by data showing a sharp rise in France's budget deficit in the first half of the year from 26.8bn euros to 29.71bn euros (�20.11bn).

Analysts said this information showed how "fragile" the French economy was and put them on notice for lower-than-expected second quarter growth figures.

"It is a new disappointment," remarked Olivier Gasnier, an economist at Societe Generale.

"We are looking at a very mediocre performance for second quarter growth."

Germany has led a steady economic recovery across the eurozone in the past 18 months, prompting the European Central Bank to raise interest rates.