Europe's economy grows a bit after months of stagnation, but rate hikes are weighing on businesses
economictimes.indiatimes.comEurope's economy has grown modestly after months of stagnation, but higher interest rates designed to fight inflation are casting a shadow as they make it more expensive for households and businesses to borrow, invest and spend. The 20 countries that use the euro currency and their 346 million people saw 0.3% growth in the April-to-June period, compared with the first three months of the year, the EU statistics agency Eurostat reported Monday. That's an improvement over zero growth in the first quarter and a slight decline in fourth quarter of last year — but not by much.
Plus, one-time factors and an outsized bump from Ireland made things look better than they really were. The eurozone got a boost by 0.5% growth in France and 0.4% in Spain, where lower inflation has helped lift consumer spending power. Yet the French figure was increased by the delivery of one very large manufactured item — a cruise ship.
That statistical quirk flattered French growth but does little to disguise weak demand for goods in the eurozone's second-largest economy. Ireland's growth of 3.3%, largest in the eurozone, also distorted the overall picture. Its growth figures often show large swings due to major international companies housing their headquarters there, including tech giants like Meta, Google and Apple.
Without Ireland, euro-area growth would have been only 0.1%, said Franziska Palmas, senior Europe economist at Capital Economics. The overall figure «was driven by a few country idiosyncrasies and masks an underlying momentum that is likely much closer to stagnation,» said Marc de Muizon, senior European analyst at Deutsche Bank Research. Europe's largest economy, Germany, struggled in the second quarter, recording zero growth after
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