The eurozone economy grew faster than expected in the second quarter of 2024, official data showed Tuesday, confirming the single currency area’s rebound since January despite Germany’s weak performance.
The figures will likely support the European Central Bank’s view that there is no need to rush to further lower interest rates so soon after a rate cut in June.
The EU’s official data agency said the 20-country single currency zone recorded growth of 0.3 per cent over the April-June period, beating economists’ forecasts.
Analysts surveyed by FactSet and Bloomberg had expected growth of 0.2 per cent.
That comes after the eurozone also grew by 0.3 per cent in the first quarter of this year, breaking away from stagnation in the second half of 2023.
In the final six months of last year, the eurozone recorded zero per cent growth.
The better-than-hoped-for growth will delight many but concerns remain over Germany, Europe’s largest economy, which is weighing on the single currency area’s performance.
Germany’s output contracted by 0.1 per cent in the second quarter.
“All in all, today’s data once again confirms that Germany is the growth laggard of the eurozone,” ING Bank’s Carsten Brzeski said.
But he added that “a rebound in the second half of the year is still possible, even though it is highly unlikely that it will be a strong one”.
There are however warning signs for the European economy after data last week showed business activity in the eurozone slowed further in July, with persistent weakness in the manufacturing sector.
In stark contrast to Germany, France, the eurozone’s second biggest economy, and Spain, the fourth, beat forecasts to grow in the second quarter by 0.3 per cent and 0.8 per cent respectively.
France is currently hosting the Olympic Games in Paris, which Capital Economics said should give “a small boost” to the eurozone economy in the third quarter of 2024.
Growth in Spain, one of the region’s strongest performers, was driven by exports and strong household spending, while in France, output grew thanks to foreign trade and a recovery in corporate investment.
Southern Europe appeared to be doing better than its counterparts elsewhere on the continent.
Italy and Portugal recorded expansion of 0.2 per cent and 0.1 per cent respectively.
Tuesday’s data also showed the 27-country European Union’s economy expanded by 0.3 per cent in the second quarter.
All eyes will be on eurozone inflation data for July which will be published on Wednesday. Consumer prices remain above the ECB’s two per cent target.