Italy, Spain push up the Eurozone, CPI tops ECB forecast

Photo: EPA Tourism guaranteed expansion by 2,8% of Spain's GDP.

The gross domestic product of the 19 nations sharing the euro posted a robust growth in the second quarter of this year driven by rapid economic recovery in Italy and Spain which grew by 2.7% and 2.8%, outpacing the bloc's average 2.0% quarter on quarter. On annual basis the growth was 13.7 percent, Reuters reported, quoting official figures of Eurostat.

Among the outperformers was Portugal's which key sector tourism guaranteed expansion by 4.9% of the country's GDP. The zone's cumulative gross domestic product was slowed down by Germany as Europe's largest economy returned to growth in the second quarter, but at 1.5% quarter-on-quarter, it was less strong a rebound than expected. The French economy, the euro zone's second largest economy, grew by 0.9%, just meeting forecasts, with a third lockdown gradually being eased from May.

Some Eurozone countries are facing new waves of infections with the more transmissible Delta variant. Other figures showed the US economy also grew at a slower than expected 6.5% annualised rate in the second quarter, pulling GDP above its pre-pandemic peak, as massive government aid and vaccinations fuelled spending on goods and services.

Eurostat noted that the Eurozone inflation accelerated to 2.2% in July, the highest rate since October 2018, from 1.9% in June and above the mean expectation of economists of 2.0%. Energy prices were again the driving factor, rising 14.1% year-on-year. Without the volatile energy and unprocessed food components, or what the European Central Bank calls core inflation, prices rose 0.9% year-on-year, the same as in June. Economists had expected a dip to 0.7%. The figures are unlikely to worry ECB policymakers, who have already warned of a temporary spike in inflation and made clear they would not adjust policy as the one-off factors behind the rise, such as higher oil prices, are likely to fade next year. Indeed, the ECB even promised a longer period of easy policy when it unveiled a new strategy earlier this month, as inflation beyond this spike is likely to fall below its target for years to come.

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