The launch of the world's second-largest cruise ship boosted France's economy in the second quarter, but Germany is heading for recession, official data showed.
Utopia of the Seas, built in Saint Nazaire for cruise ship operator Royal Caribbean, added 1 billion euros (£840 million) to France's economic output, helping to lift trade growth to 0.6% and gross domestic product to 0.3% in the three months to the end of June.
The euro zone grew 0.3% in the third quarter after a revised 0.3% expansion in the first quarter, with many analysts saying the 20-nation bloc has turned around after nearly sliding into recession in 2023.
Spain made strong progress in the second quarter with growth of 0.8%, while Italy maintained its recovery with GDP rising by 0.2%.
Germany, the euro zone's largest economy, contracted again, with output falling 0.1%.
Euro zone growth beat City analysts' expectations, “suggesting a turnaround in the euro zone since the start of the year,” said Pushpin Singh, a senior economist at the Centre for Economic and Business Research, a consultancy.
“The outlook is likely to improve further throughout the year due to recent policy easing by the European Central Bank and expectations of further interest rate cuts in the future,” he added.
Bert Collin, a senior economist at Dutch bank ING, is more worried that German economic growth will become a bigger drag on the euro zone.
“Germany remains the weak link in the post-pandemic economy, but other countries are not great either.
“Except for Spain, the economies are only going to grow at a slow pace.”
The French economy grew at a slightly faster pace than expected and could improve again in the third quarter if the Olympics stimulates consumer spending, easing concerns that France's parliamentary deadlock after recent elections would throw the economy off track.
French Finance Minister Bruno Le Maire said the second quarter's economic performance and the Paris Olympics would probably mean growth this year would exceed the previous government's 1% forecast.
“In the end, growth will be higher than the 1 percent forecast in February,” Le Maire said. “France has had two years of success. Our economic policies are working and are producing visible results.”
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He added that better-than-expected growth could be a boon for a tight budget deficit and that France needed to remain focused on cutting spending.
Anja Sabine Heimann, an economist at HSBC Germany, said industrial orders were weak and German consumers were reluctant to spend, adding that the risk of a recession was “rising”.
The country has suffered near-zero growth over the past two years and narrowly avoided recession.
Hyman said many of the ingredients for an economic slowdown are already in place.
“Domestic and international industrial orders continue to trend downwards, highlighting the lack of support from industry in the near term,” she added.
“Consumer prices remain around one-fifth above 2019 levels and, despite strong recent nominal wage increases, German households have yet to recover their purchasing power.
“As a result, their spending scope remains somewhat limited and large-scale consumer spending is unlikely to occur.”
