Eurozone GDP up 0.3% in Q2

Seasonally adjusted GDP increased by 0.3 percent in both the eurozone and the European Union (EU) area in the second quarter of 2024, compared with the previous quarter, according to preliminary data released on Tuesday by Eurostat.

In the first quarter of 2024, GDP had also grown by 0.3 percent in both regions, reported the statistical office of the EU.

Germany's output contracted by 0.1 percent in the second quarter, according to Eurostat data. France and Spain experienced growth of 0.3 percent and 0.8 percent, respectively. The highest growth rate was recorded in Ireland, with a 1.2 percent increase in the second quarter. Conversely, Latvia experienced a notable decline of -1.1 percent, with Sweden and Hungary also reporting negative growth.

Bert Colijn, a senior economist at ING, remarked that although the Eurozone economy grew faster than expected in the second quarter, the recovery remains cautious, supported by low unemployment and reduced inflation. Colijn also said that there are no signs of further acceleration in the Eurozone's economic growth.

"The differences within the eurozone remain striking," Colijn said, noting that Spain continues to be the eurozone's growth engine, while France also looked healthier than expected in the second quarter, although this was mainly due to one-off export effects.

"Germany remains the weak link in this post-pandemic economy, and the overall performance is lackluster without Spain's contribution," he added.

Colijn also expressed concerns about the future, citing a decline in the Eurozone's Purchasing Manager Index (PMI) over the past two months and ongoing manufacturing weaknesses due to low ordering. Consequently, the outlook for the third quarter does not seem promising, he said.

For the European Central Bank (ECB), the current economic environment suggests that rate cuts remain a possibility, as domestic demand is unlikely to drive significant inflation, said Colijn. The ECB kept key interest rates unchanged at its July meeting, following a major policy shift in June, when it reduced rates by 25 basis points, marking its first cut since September 2019.