The eurozone grew slightly faster than expected in the second quarter, but Germany slumped back into contraction as Europe’s largest economy faced the threat of recession again.
Figures released today by Eurostat showed that the eurozone grew 0.3 per cent in the second quarter, matching the pace of growth in the first quarter and slightly ahead of the 0.2 per cent expected by economists.
“The stronger-than-expected growth rate suggests the bloc has turned a corner since the start of the year,” Pushpin Singh, senior economist at the Centre for Economics and Business Research (CEBR) said.
Spain was the strongest performing major economy, notching quarterly growth of 0.8 per cent on the back of strong consumer spending and an improving trade picture.
France meanwhile grew 0.3 per cent thanks to a boost from net trade. Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said France’s performance was “decent,” but said the details “point to soft domestic demand”.
Stronger growth in Spain and France helped to offset a weak performance from Germany.
Early estimates suggest the German economy contracted 0.1 per cent quarter-on-quarter, having increased 0.2 per cent in the first three months of the year. The weak performance reflected lower investment in equipment and construction.
The German economy, the largest in the eurozone, has been hit particularly hard over the past couple of years due to its heavy reliance on manufacturing and weak demand for its exports. Across 2023 the German economy contracted 0.3 per cent.
“Germany is once again the sick man of Europe,” Kathleen Brooks, research director at XTB said.
Despite the slightly stronger performance in the second quarter, Jack Allen-Reynolds deputy chief eurozone economist at Capital Economics, said the economy was still struggling.
“The bigger picture is that the timeliest surveys are fairly weak and we expect the economy to undershoot consensus forecasts over the next few years,” he said.
Growth in the eurozone has stuttered due to the impact of the European Central Bank’s (ECB) interest rate hikes and the impact of the war in Ukraine, but some economists expect it to accelerate on the back of looser monetary policy.
The ECB cut interest rates for the first time in five years in June, although policymakers then chose to leave rates on hold in July as they look for more evidence that inflationary pressures are decisively under control.
At the last meeting, Christine Lagarde, president of the ECB, said September’s meeting was “wide open” with many economists expecting a further cut.
The European Commission expects the eurozone to grow 0.8 per cent across this year before accelerating to 1.4 per cent next year.