The French economy suffered a sharper-than-expected fall in growth during the second quarter, casting a shadow over hopes of a recovery in the euro zone.

French GDP fell 0.3 per cent in the period, according to figures released yesterday by Insee, the official statistics institute, which lowered its previous figure for first-quarter growth from 0.3 per cent to 0.2 per cent.

Equity markets have risen strongly in recent weeks on hopes that an accelerating US pick-up will drag the 12 euro-zone nations out of the mire.

"It shows we should not get carried away by market optimism," said Mr Ken Wattret of BNP Paribas. "At the moment it is expectations that are leading the charge... there's not much improvement in hard data."

Forward-looking surveys, such as Germany's Zew index, which rose strongly this week, have pointed to a rebound in optimism and a gradual upturn by the year-end. But the weak data from France - Europe's second-largest economy - highlight the lack of drive in the region's economy.

They are likely to lead to a downward revision of preliminary GDP data which showed the euro zone stagnated in the second quarter as recession gripped Germany, Italy and the Netherlands.

"Last week's snap estimate of flat euro-zone growth is already looking optimistic," said Mr Mark Cliffe of ING.

Eurostat - the EU statistics agency - is now likely to cut its estimate of euro-zone economic growth in the second quarter from zero to minus 0.1 per cent, according to Reuters. The French finance ministry yesterday issued a brief statement dismissing the second-quarter data as unrepresentative, but economists believe annual growth is now unlikely to reach 0.7 per cent - the worst performance since the 1973 recession.