The Eurozone avoided recession with updated data from Eurostat. However, concerns remain about growth in the region, with the push toward the crisis possibly coming from Germany.
The eurozone economy avoided a winter recession, according to revised data it stagnated earlier this year instead of contracting as previously thought.
Output in the 20-nation currency bloc was unchanged in the first quarter, according to Eurostat’s Thursday, July 20 update. The previous reading was -0.1%, which, combined with a drop of the same magnitude at the end of 2022, suggested the first six-month contraction since the Covid-19 pandemic.
The manufacturing sector is proving to be the main obstacle to growth. Inflation is also weighing on the region, although it has nearly halved from its peak of 10.6% in October. The European Central Bank is expected to raise interest rates again next week.
Analysts are now asking whether Europe really is out of danger of recession.
Stagnant Europe, but no recession. What to expect?
Optimism is very cautious about the Eurozone’s recovery and Europe in general. Jamie Rush, chief European economist at Bloomberg Economics said:
Whether the euro area contracted over the winter or not, the outlook remains one of persistent weakness. As the impact of the energy shock passes, it is giving way to a tightening of tight monetary policy. This will keep growth slow for the rest of the year.
Concern has also emerged from Portugal’s finance minister, who says further interest rate hikes by the European Central Bank could fuel dangers for the euro area economy as it tries to pull itself out of a recession.
Warnings about the consequences of further tightening are growing louder as the ECB nears the end of a campaign it began a year ago and which has taken its deposit rate to 3.5% from below zero.
Portuguese Prime Minister Antonio Costa said last month that officials in Frankfurt did not adequately understand the nature of euro area inflation, while his Italian counterpart, Giorgia Meloni, said that steady rate hikes risk turning into a cure that does more harm than good.
Production in the 20-nation bloc fell between October and March after prices soared and politicians moved aggressively to curb them. In Portugal, where inflation has fallen to 4.7% since its euro-era record late last year, consumers are being squeezed by the prevalence of ever-increasing variable interest rates on mortgages and loans.
However, Bank of America struck a more optimistic tone, citing resilient services activity and robust tourism as strengths of the Eurozone. According to bank strategists, the biggest laggard in the region is Germany, which is struggling to emerge from its own recession.
German industrial production fell unexpectedly in May and low water levels in the strategically important Rhine River add to concerns for Europe’s largest economy. BofA expects the country’s industrial sector to be slightly negative in the second quarter
Original article published on Money.it Italy 2023-07-20 12:59:40. Original title: Europa evita la recessione per un soffio: durerà? Attenzione alla Germania
