The eurozone recovery gathers strength

The recovery in the eurozone has gathered pace following a rise in GDP in the first and second quarter of this year.

759-girl-with-flag-634

Some cheer at last from the eurozone

There was, for a change, good news from the eurozone this week. The second estimate of second-quarter GDP showed a rise of 0.4%, up from a first reading of 0.3%. The first quarter was also nudged higher, from 0.4% to 0.5%, the highest quarterly figure since 2011.

Last week, a composite PMI reading, a gauge of how both services and manufacturing are performing, edged up to a four-year high. Second-quarter growth in Spain reached 1%, contrasting starkly with stagnation in France. Meanwhile, Germany notched up exports worth €103.4bn in July, a new record. The trade surplus of €225bn also marked a new peak.

What the commentators said

But if China suffers a "serious and sustained slowdown", it will make life difficult for the eurozone, noted Raoul Ruparel on Forbes.com. Germany alone accounts for close to half of all EU exports to China. Germany is the locomotive of the eurozone, accounting for around 30% of the bloc's GDP. "Many of its exports drive import demand from other eurozone countries." Some of the latest market turmoil has not been factored into the latest figures, said Capital Economics, and the same goes for the recent rise in the euro.

It doesn't help that the European Central Bank (ECB) could find its life more difficult, whether or not the US Federal Reserve raises US interest rates next week, said Paul Davies in The Wall Street Journal. If the Fed holds off, a stronger euro could continue to hamper European growth. But if it lifts rates, there could be another bout of jitters in emerging markets, in turn denting Europe's export prospects.

The ECB president may well have to step up his money printing programme if growth subsides and inflation stays weak. But that, as John Stepek noted in our free daily email Money Morning this week, would be good news for European equities.

Recommended

UK inflation slides to 8.7% - what does it mean for your money?
Economy

UK inflation slides to 8.7% - what does it mean for your money?

Inflation has dropped below 10% for the first time in months, but with food prices at a 45-year high, is this good news and what does it mean for your…
24 May 2023
Why the UK equity market is shrinking
Economy

Why the UK equity market is shrinking

The crisis has been building for 25 years, says Max King, and it will take decades to reverse the trend.
18 May 2023
How inflation is hitting you in the pocket
Economy

How inflation is hitting you in the pocket

Our money has been debased for decades. The blame lies with the advent of fiat money, says Dominic Frisby.
11 May 2023
NIESR: ‘Squeezed’ middle class households now £2,560 a year worse off
Economy

NIESR: ‘Squeezed’ middle class households now £2,560 a year worse off

Britain will feel like it’s in recession even if it isn't after a significant drop in middle-class income - and the poorest households are even worse …
11 May 2023

Most Popular

How much will it cost you to retire early?
Pensions

How much will it cost you to retire early?

The pre-state pension income gap means couples may need an extra £136,000 if they want to retire at 60 – can you afford to retire early?
6 Jun 2023
Best debit and credit cards to use while travelling abroad
Personal finance

Best debit and credit cards to use while travelling abroad

If you’re going on holiday or travel abroad regularly, it’s worth knowing what the best card is to avoid hefty fees. We weigh up the charges and any p…
6 Jun 2023
Best easy access savings accounts – June 2023
Savings

Best easy access savings accounts – June 2023

Rising interest rates have boosted the returns on instant-access savings accounts and we're seeing some of the highest rates seen in years. We look at…
8 Jun 2023