The largest economy in the euro zone, Germany, continued to suffer as the economy unexpectedly shrank in the second quarter after avoiding a recession at the start of the year and July's inflation increased.
In comparison to the preceding three-month period, Germany's gross domestic product shrank by 0.1% in the second quarter, according to preliminary figures released by the statistics office on Tuesday.
Reuters surveyed analysts, who predicted 0.2% GDP growth in the first quarter, now predicted a 0.1% quarter-over-quarter gain in adjusted terms.
Germany was the worst-performing major economy in the previous year, with a 0.3% decline in GDP. Buffeted by a mix of structural and cyclical challenges, it verged on recession in the beginning of 2024.
Germany continued to lag behind its rivals in the second quarter, and the growth gap between them grew: while the German economy shrank, France and Spain performed better than anticipated, while Italy maintained its position.
Relative to June, the euro zone's GDP expanded by 0.3%, according to figures released on Tuesday.
Carsten Brzeski, global head of macro at ING, stated, "Although the German data is stagflationary, the eurozone as a whole provides a picture of a relatively solid but potentially fading recovery with sticky inflation."
In line with forecasts, German inflation increased in July to 2.6%, according to preliminary figures released on Tuesday by the federal statistics agency.
Based on statistics standardised for comparison with other EU nations, analysts surveyed by Reuters had predicted no change in the inflation rate following June's 2.5% year-over-year increase in consumer prices.
The argument for a September rate drop by the European Central Bank will be made clear by inflation data for the euro zone that are expected on Wednesday. The market is anticipating one more rate decrease before year's end.
Analysts claim that inflation in Germany appears to be stuck over 2%.
"It is this stickiness of inflation that will strengthen the doubts around another rate cut at the September meeting," Brzeski stated.
Core inflation, which does not include erratic energy and food prices, remained at 2.9% in July from the previous year.
This is mostly because to the persistently high rate of service inflation, which held steady at 3.9% in July as a result of significant pay increases.
Ralph Solveen, senior economist at Commerzbank, stated that "this is unlikely to change much for the time being, meaning that the core inflation rate will remain well above the ECB's target of 2% in the coming months."
According to Capital Economics, a rate reduction in September is still anticipated.
"Nevertheless, it appears to be a tight situation that will rely on the August inflation figures," stated Andrew Kenningham, the head European economist at the research company.
(Source:www.investing.com)
In comparison to the preceding three-month period, Germany's gross domestic product shrank by 0.1% in the second quarter, according to preliminary figures released by the statistics office on Tuesday.
Reuters surveyed analysts, who predicted 0.2% GDP growth in the first quarter, now predicted a 0.1% quarter-over-quarter gain in adjusted terms.
Germany was the worst-performing major economy in the previous year, with a 0.3% decline in GDP. Buffeted by a mix of structural and cyclical challenges, it verged on recession in the beginning of 2024.
Germany continued to lag behind its rivals in the second quarter, and the growth gap between them grew: while the German economy shrank, France and Spain performed better than anticipated, while Italy maintained its position.
Relative to June, the euro zone's GDP expanded by 0.3%, according to figures released on Tuesday.
Carsten Brzeski, global head of macro at ING, stated, "Although the German data is stagflationary, the eurozone as a whole provides a picture of a relatively solid but potentially fading recovery with sticky inflation."
In line with forecasts, German inflation increased in July to 2.6%, according to preliminary figures released on Tuesday by the federal statistics agency.
Based on statistics standardised for comparison with other EU nations, analysts surveyed by Reuters had predicted no change in the inflation rate following June's 2.5% year-over-year increase in consumer prices.
The argument for a September rate drop by the European Central Bank will be made clear by inflation data for the euro zone that are expected on Wednesday. The market is anticipating one more rate decrease before year's end.
Analysts claim that inflation in Germany appears to be stuck over 2%.
"It is this stickiness of inflation that will strengthen the doubts around another rate cut at the September meeting," Brzeski stated.
Core inflation, which does not include erratic energy and food prices, remained at 2.9% in July from the previous year.
This is mostly because to the persistently high rate of service inflation, which held steady at 3.9% in July as a result of significant pay increases.
Ralph Solveen, senior economist at Commerzbank, stated that "this is unlikely to change much for the time being, meaning that the core inflation rate will remain well above the ECB's target of 2% in the coming months."
According to Capital Economics, a rate reduction in September is still anticipated.
"Nevertheless, it appears to be a tight situation that will rely on the August inflation figures," stated Andrew Kenningham, the head European economist at the research company.
(Source:www.investing.com)
