Europe’s economy turns a corner
The euro area economy appears to have turned a corner after flirting with recession during the second half of 2023. It grew slightly more than expected in the second quarter at 0.3%. Spain posted the strongest quarterly growth, with 0.8%, followed by France and Italy which expanded by 0.3% and 0.2 % respectively. However, it was another disappointing quarter for Germany, which contracted by 0.1%.
Inflation across the region ticked up to 2.6% in July, which is above the European Central Bank’s (ECB) 2% target. Core inflation, which excludes more volatile food and energy prices, hit 2.9% in July. The ECB held rates steady after reducing them in June, leaving open the option for another cut in September.
Meanwhile, Asian stocks rallied after fears of a US recession faded, helping to reverse the steep declines seen earlier in the month. China’s economy continues to be weighed down by a persistent property slump, low consumer spending and elevated unemployment.
This real estate downturn slowed overall fixed asset investment growth to 3.6% from January to July, compared with a 3.9% rise in the first half of the year. The unemployment rate increased to 5.2% as economic momentum slowed and business confidence weakened.
Despite surprising markets with a rate cut in July, China kept its benchmark lending rates unchanged. Imports grew by 7.2% in July, exceeding expectations, while export growth dipped to 7%.
