The euro zone economy grew better than expected in the second quarter despite a slump in Germany, official data released on Tuesday showed, easing concerns about the region's recovery.
The single currency area is shaping up better than it will be in 2023, but economists remain concerned about the rest of the year, despite hopes of an economic boost from the Olympics in France.
The EU's official data agency said the 20-nation single currency area grew 0.3 percent in the April-June period, beating economists' expectations.
Analysts surveyed by FactSet and Bloomberg had expected growth of 0.2%.
The eurozone is also expected to grow by 0.3% in the first quarter of this year and emerge from stagnation in the second half of 2023.
While the better-than-expected growth will please many, concerns remain about Germany, Europe's largest economy, which has been weighing on the euro zone's performance.
German output fell 0.1 percent in the second quarter, Eurostat data showed.
But data released last week showed that euro zone business activity slowed further in July and manufacturing remained weak, raising warning signs for the European economy.
“The euro zone economy is a lot like the water quality of the Seine: one day it seems OK, but overall it's bad enough to be of ongoing concern,” Bert Collin of ING Bank said, referring to concerns about whether Paris's Seine is clean enough to host Olympic open water swimming events.
He said these figures are
The European Central Bank (ECB) is set to cut interest rates further, but the Frankfurt-based institution has said it needs more time before cutting rates further.
Other economists said the data supported the ECB's view that there was no need to rush.
“This means that rate cuts remain on the table for the ECB, as domestic demand is unlikely to boost inflation by much,” he said.
However, the euro area's growth rate was slower than that of the United States and China, which both posted growth of 0.7% in the second quarter.
The International Monetary Fund expects the eurozone to grow by 0.9% in 2024, while the United States is expected to grow by 2.6% and China by 5.0%.
In contrast to Germany, the euro zone's second-largest economy, France, and fourth-largest, Spain, beat expectations, growing 0.3 percent and 0.8 percent respectively in the second quarter.
France is currently hosting the Olympics in Paris, which Capital Economics says should provide a “modest boost” to the eurozone economy in the third quarter of 2024.
In Spain, one of the region's strongest economic growth countries, exports and solid household spending drove economic growth, while a recovery in foreign trade and business investment boosted production in France.
Southern Europe appears to be faring better than other parts of the continent.
Italy and Portugal recorded growth of 0.2% and 0.1% respectively.
Data on Tuesday showed the economies of the 27 European Union member states, which includes countries outside the euro zone, also expanded 0.3 percent in the second quarter.
All eyes will be on euro zone inflation data for July due to be released on Wednesday, with consumer prices rising above the ECB's 2% target.
