France, Italy and Spain see improvement in growth, but Germany stagnates

Eurozone economies grew 8.9% from 8.6% last month, more than three times more than economists expected, despite inflation in the currency areas of 19 member countries.

Analysts say unexpected growth builds a stronger foundation for the larger European Union (EU) economy, despite the surge in inflation that could drive the entire continent into recession and the impending blockage of Russia’s gas. Claims to put.

In the second quarter of 2022, seasonally adjusted GDP increased 0.7% in the euro area and 0.6% in the EU from the previous quarter. According to Eurostat preliminary dataStatistics Bureau of the European Union.

In the first quarter of 2022, GDP grew 0.5% in the euro area and 0.6% in the EU.

Jamie Rush, Chief European Economist at Bloomberg, said:

“Inflation in July was also better than expected, but the full impact of Russia’s restraint on European gas supplies has yet to be felt. Given the tight financial conditions, a sharp slowdown seems inevitable. Looks like. “

The European Central Bank has announced that it will halve deposit rates in July due to soaring inflation.

The EU’s underlying inflation rate index, excluding energy and food, reached a record high of 4% after the June slowdown.

European interests and predicament

However, Germany, Europe’s largest economy, has experienced a major recession since March due to a serious energy shortage.

The International Monetary Fund announced on July 26 that the G7’s economy would be the weakest by the end of 2022, as Germany relies heavily on Russia’s natural gas.

A 20% reduction in gas imports from the Nord Stream 1 pipeline has forced German authorities and industry leaders to warn of future challenges.

Growth is expected to remain restrained at 0.2% in the third quarter, while Bloomberg forecasts a 0.9% contraction in Germany in the third quarter.

In the face of Germany’s potential energy crisis, cities and state governments order to turn off the spotlights on public monuments, close fountains, and force cold showers in municipal pools and sports venues. We have established energy-saving measures such as taking a shower.

Hanover, Lower Saxony, was the first metropolis to implement energy-saving measures, such as eliminating showers and hot water in bathrooms in public buildings and recreational facilities.

Private buildings will only be heated at low temperatures from October 1st to March 31st, mobile air conditioning units and fan heaters will be banned.

Only nurseries, schools, elderly housings and hospitals are exempt from energy conservation efforts.

Spain and Italy, on the other hand, saw growth of more than 1% in the last three months in the second quarter due to increased tourism after the blockade.

France’s GDP increased by 0.5%, primarily due to a contraction at the beginning of the year due to trade, but consumer spending there declined. According to Bloomberg.

European stocks rose on July 29, and the Stocks Europe 600 Index rose 0.8% in the morning (GMT) after hitting a seven-week high in the previous session.

The market is the largest month since November 2020, as investors feel optimistic about the Fed’s premonition of delaying rate hikes amid rising corporate earnings and fears of a recession in the U.S. It can reach a rise.

The rebound began earlier this month after a significant drop in the first two quarters of 2022 as high inflation and slowing growth caused an investor recession.

Poor US economic data released last week has triggered a bet that the Fed will curtail its hawkish strategy of raising rates.

The outlook for the European economy remains uncertain, as the temporary boost from summer tourism in certain member countries is temporary.

The prolonged energy crisis over Ukraine, coupled with the supply chain crisis and record high inflation growth, will continue to put downward pressure on demand and production throughout the year and perhaps beyond.