Preliminary data from the European Union's statistics agency Eurostat has shown that the eurozone economy grew by 0.3% in the second quarter of this year, surpassing expectations of 0.2%. This offers hope to policymakers who are aiming to balance growth in the bloc while combating high inflation.
Despite the sluggish performance in some major members, the overall growth of the eurozone economy is a positive sign. Italy's economy unexpectedly contracted in the quarter, while Germany experienced stagnation. On the other hand, France and Spain saw better-than-expected growth. Ireland had the fastest expansion at 3.3%, whereas Austria, Sweden, and Italy experienced a decrease in GDP.
However, it is important to note that the one-off factors such as export growth in France and volatile data in Ireland may give a misleading impression of the underlying strength of the economy. Andrew Kenningham, Capital Economics chief Europe economist, believes that these factors will likely result in a contraction in the second half of the year.
The European Central Bank's interest-rate decision in September may be influenced by the headline growth of the eurozone economy. While the bank recently raised its rates, it remains open to pausing any further increases to avoid hindering growth and pushing the eurozone into a recession.
The ECB projects a GDP growth of 0.9% this year, which is slower than the 3.5% growth achieved last year. However, it anticipates a rebound in the following years.
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