Euro Zone GDP Growth 2.1% in Second Quarter

Jul 31, 2018

Growth in the euro area economy slowed slightly in the second quarter, according to a preliminary estimate released on Tuesday, adding to the view that the region’s economy has shifted into a lower gear for now.

Eurostat said the euro area economy grew by an annualized 2.1% in the three months to June, down from 2.5% in the first quarter, compared to forecasts of 2.2%.

The economy expanded by 0.3% in the second quarter.

At the same time, a separate report showed that the euro zone unemployment rate remained unchanged at 8.3% in June.

Another report showed that the annual rate of inflation in the euro area ticked up to 2.1% in July, while underlying inflation also picked up, rising to an annualized 1.1%.

Earlier this month, the European Commission downgraded its growth forecast for the euro zone in 2018, due to external factors such as U.S. trade uncertainty and high oil prices.

In its summer interim forecast, the European Commission said it now expects the euro area economy to grow by 2.1% this year, down from the 2.3% it projected in the spring.

The EC expects growth to strengthen somewhat in the second half of this year, as labor market conditions improve, household debt declines, consumer confidence remains high and monetary policy remains supportive.

Last week the European Central Bank left interest rates on hold and confirmed plans to wind up its massive bond purchasing stimulus program in December.

ECB President Mario Draghi reiterated that the ECB needs to be “patient, persistent and prudent” in its policy to ensure that inflation remains on a sustained adjustment path.