Eurozone GDP growth ticks up to 0.6% in Q2; euro steady

Posted August 01, 2017

GDP rose by 2.1% in the second quarter of this year in the euro area compared to the same three months the year before, and 2.2% in the whole of the European Union in the second quarter compared to the same quarter the year before.

At the same time, a year-on-year growth jumped to 2.1 percent from 1.9 percent, marking the best level in five years. Today's figures are based on the flash preliminary estimates from Eurostat, with a more detailed release due on August 16.

The jobless rate fell to 9.1pc last month, from a downwardly revised 9.2pc in May, according to Eurostat.

The data reinforces the view that the Eurozone economy continues to gain momentum after more than two years of massive asset purchases by the European Central Bank and nearly a year and a half of negative interest rates.

Earlier, the final IHS Markit Euro-Zone manufacturing PMI showed that Euro-Zone manufacturing growth slowed slightly at the start of the third quarter.

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Job creation quickened, production picked up and order books improved, according to the poll of purchasing managers at more than 600 industrial companies.

He highlighted particularly solid growth in United Kingdom exports, which have been made more competitive by the pound's sharp drop after the Brexit vote and have benefitted from a strengthening global economy.

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. The monetary policy committee meets this week to make its latest decision on borrowing costs and to release new forecasts for the economy. Any good data from the Eurozone is likely to make the process of tapering easy and also push the European Central Bank towards the same, much quicker than anticipated, and this is something that the market hates.

"The economy is recovering and the labor market is doing quite well, but we think core inflation will be at 1 percent and below for the rest of 2017", said Marco Wagner, economist at Commerzbank.

However, there are signs that underlying price pressures might be picking up.