After months of slowdown, Europe’s economy has seen a tiny increase. But higher interest rates intended to combat inflation are casting a shadow. The economy makes it more costly for families and companies to borrow, invest, and spend money. After all, several economies are fearing a global recession.
According to a study released on Monday by the EU statistics office Eurostat, the 346 million people living in the 20 countries that use the euro showed growth of 0.3% from April to June. These numbers are compared to the first three months of the year. The Europe economy kind of bounced back while a global recession was coming along.
The country’s GDP saw a decline of 0.1% in the last 3 months of 2022 and later was stagnant for the first quarter of 2023. Separately, official figures revealed that this month’s total inflation rate continued to decline. In the eurozone, the consumer price index increased by 5.3%, down from 5.5% in June.
The “Core Inflation”
The bank predicts that GDP will remain flat for the remainder of the year. With annual growth capped at only 0.6%, partly due to a poor Chinese economy, and weakness in global manufacturing. Also, a fall in residential development is predicted. In 2024, it predicts that average growth will increase to 1%. The predictions for a global recession might just lessen soon.
However, core inflation, which excludes volatile food and energy prices, remained at 5.5% in July. Furthermore, the inflation rate for services and unprocessed food increased slightly to 5.6% and 9.2%, respectively. The Europe economy, also called Eurozone, is a much broader outlook.
“Today’s data broadly validates our near-term outlook, which anticipates very weak growth in H2, and a summer moderation in the pace of disinflation followed by a relatively sharp fall in Q4,” Oxford Economics said in a note on Monday.
Ireland, which had the biggest growth rate in the eurozone of 3.3% shifted the overall figure. Ireland being the location of the headquarters of several huge worldwide corporations can be a reason behind this. Housing headquarters of tech giants like Meta, Google, and Apple, growth statistics frequently exhibit significant fluctuations.
The Euro Zone Growth
Germany, being the biggest of the Europe economy, suffered in the second quarter, achieving zero growth after two consecutive quarters. Germany dealt with rising energy prices brought on by Russia’s conflict in Ukraine. The economy of third-place Italy decreased by 0.3%.
A positive development for Europe is that, despite recent heat waves and wildfires, travelers are expected to continue to head to the beach for their summer vacations in Greece, Spain, and Italy, supporting growth in the upcoming third quarter.
The European Central Bank observed nine consecutive hikes when it increased the benchmark interest rate in the Eurozone. The Europe economy saw an increase in interest rate by a quarter of a percentage point to 3.75% on Thursday.
But ECB President Christine Lagarde told reporters that she was thinking about holding off on raising rates at the next meeting of the institution in September.
