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

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
No deal is the best deal for Britain – and the EU too
Brexit

No deal is the best deal for Britain – and the EU too

Europe has a lot to gain from a thriving, independent Britain, says Matthew Lynn.
6 Sep 2020
Europe’s magic works better in the dark
EU Economy

Europe’s magic works better in the dark

Europe’s latest fiscal intervention looks like the kind of muddle-through that makes a United States of Europe more likely, says Merryn Somerset Webb.…
28 Aug 2020
The eurozone takes a big step forward towards fiscal union
EU Economy

The eurozone takes a big step forward towards fiscal union

The European Union’s coronavirus recovery plan and its decision to issue joint debt will change the bloc forever.
23 Jul 2020

Most Popular

Here’s why you really should own at least some bitcoin
Bitcoin

Here’s why you really should own at least some bitcoin

While bitcoin is having a quiet year – at least in relative terms – its potential to become the default cash system for the internet is undiminished, …
16 Sep 2020
Will a second wave of Covid lead to another stockmarket crash?
Stockmarkets

Will a second wave of Covid lead to another stockmarket crash?

Can we expect to see another lockdown like in March, and what will that mean for your money? John Stepek explains.
18 Sep 2020
James Ferguson: How bad data is driving fear of a second wave of Covid-19
UK Economy

James Ferguson: How bad data is driving fear of a second wave of Covid-19

Merryn and John talk to MoneyWeek regular James Ferguson about the rise in infections in coronavirus and what the data is really telling us.
17 Sep 2020