Euro Area: GDP growth steady in the second quarter
GDP reading: According to a preliminary estimate, GDP growth was stable at 0.3% on a seasonally adjusted quarter-on-quarter basis in the second quarter. The print surprised markets on the upside. On an annual basis, economic growth edged up to 0.6% in Q2, compared to the previous quarter’s 0.5% expansion and marking the fastest growth since Q1 2023.
Drivers: Looking at the Euro area’s largest economies, sequential growth came in at 0.8% in Spain and 0.3% in France, both unchanged from their Q1 readings. Less positively, Italy’s GDP growth slowed to 0.2% from 0.3% in Q1, and the German economy posted a 0.1% contraction after growing 0.2% in the prior quarter.
GDP outlook: Our Consensus is for GDP growth to match H1’s pace in H2, with sentiment data for July pointing to steady momentum at the outset of Q3. Spain is set to remain the top performer among regional heavyweights, while Germany’s paltry recovery will keep a lid on overall momentum.
Panelist insight: Bert Colijn, senior economist at ING, commented:
“The eurozone economy is quite like the water quality of the Seine: some days it may look okay but overall it’s poor enough to continuously worry about it. For the European Central Bank, this means that rate cuts very much continue to be on the table as domestic demand is unlikely to cause much of an inflation push.”