Eurozone recovery on track as growth rises

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The pace of growth in the 19-member state bloc accelerated to 0.6 percent in the three months to June, in line with an average forecast from economists and a steady pace of expansion that will encourage policymakers.

The euro zone may not be growth champion in the second quarter, after the US rebounded to an annualized 2.6 percent thanks to consumer spending and business equipment investment.

The biggest downside risk from within the single currency area was Italy, Barclays added, which they still expected to hold elections in the first quarter of 2018.

Policymakers would be reassured by signs in the PMI report that manufacturers' cost pressures eased in July, said Howard Archer, chief economic adviser to forecasting body, the EY ITEM Club.

Euro zone economic sentiment, as compiled by the European Commission, grew for a third straight month in July to a new 10-year high due to a pick-up of the dominant services sector. The lowest rate was observed in Germany while the highest was recorded in Greece.

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The ECB targets inflation of "just below 2 percent".

The euro is on course for its best year since 2003 when it ended the year up more than 12 percent.

Since the start of the year, with the exception of February, the euro has ended the month on a positive note. Despite the still below target inflation, the general improvement in economic conditions and slightly less dovish comments from Mario Draghi means we think there is a reasonable chance the European Central Bank could announce a winding down of its QE programme when it next meets in September.

But a jump in inflation, stemming from the 13 per cent slump in the value of the pound in the wake of the referendum, has dampened consumer spending this year, and pushed the UK's growth rate to the lowest of the G7 club of large and developed economies.

Meanwhile, the EU28 unemployment rate was 7.7% in June, down from 8.6% in the same time previous year.

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