Eurozone Economy Fares Better Than Expected In Q2

(RTTNews) - The euro area economy logged better-than-expected growth in the second quarter but the pace of expansion slowed markedly as the first quarter performance was inflated after U.S. importers frontloaded their orders to reduce the cost burden of higher tariffs.

Gross domestic product grew 0.1 percent sequentially, after rising 0.6 percent in the first quarter, preliminary flash estimate from Eurostat showed Wednesday. GDP was expected to remain flat.

On a yearly basis, economic growth softened to 1.4 percent from 1.5 percent in the prior quarter. Nonetheless, the growth rate was better than the forecast of 1.2 percent.

The EU27 GDP grew 0.2 percent from the previous quarter and expanded 1.5 percent from the prior year.

Among the member states from whom second quarter data was available, Spain recorded the strongest growth followed by Portugal and Estonia. Meanwhile, declines were recorded in Ireland, Germany and Italy.

Spain's GDP advanced 0.7 percent, following a 0.6 percent rise in the prior quarter. The growth was driven by robust household spending and investment.

The French economy logged a faster-than-expected growth of 0.3 percent, underpinned by recovering household spending. This followed a 0.1 percent rise in the first quarter.

On the other hand, the German economy shrank 0.1 percent sequentially, as expected, reversing the downwardly revised 0.3 percent growth posted in the first quarter.

Italy also contracted 0.1 percent in the second quarter, partially offsetting the 0.3 percent expansion in the first quarter. This was the first fall since the second quarter 2023.

"While short-term risks to the outlook remain high, improvements in sentiment provide encouraging signs for the coming quarters as economic uncertainty hopefully eases," ING economist Bert Colijn said.

Despite the uncertainty prevailing in the first half of the year, combined GDP growth in the first two quarters has not disappointed, Colijn noted.

Economic confidence in the euro area strengthened to a five-month high in July largely driven by stronger confidence in industry, services and retail trade, data from the European Commission showed.

The economic sentiment index rose to 95.8 in July from 94.2 in the previous month. This was the highest reading since February and remained above forecast of 94.5.