2023-07-31 11:15:58
Eurozone GDP returns to sequential growth but core inflation falls less than expected
2023-07-31 19:15:58 Source: Financial Association shared to:
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On Monday (July 31), local time, preliminary data released by Eurostat showed that the second quarter economic growth in the euro area was slightly stronger than expected, and the inflation rate continued to fall, but the core inflation slowed down less than expected.
Specific data show that the gross domestic product (GDP) of the euro zone in the second quarter rose by 0.3% month-on-month, returning to positive values following experiencing a quarter of negative growth and a quarter of zero growth.
The year-on-year growth rate of GDP was 0.6%, which was stronger than the market’s original expectation of 0.5%, but it was 0.5 percentage points slower than the 1.1% in the first quarter of this year, which was the lowest annual rate since the second quarter of 2021.
In terms of countries, Ireland’s GDP in the second quarter recorded an annual rate of 2.8%, the highest among the countries that have released data, followed by Portugal (2.3%) and Spain (1.8%). Quarter-on-quarter contraction.
In terms of inflation, preliminary statistics show that the inflation rate in the euro zone in July – Harmonized Consumer Price Index (HICP) fell by 0.1% month-on-month and rose by 5.3% year-on-year, both in line with expectations. The year-on-year inflation rate in June was 5.5%.
The data also showed that the prices of food, tobacco and alcohol rose by 10.8 percent year-on-year, service prices rose by 5.6 percent, non-energy industrial product prices rose by 5.0 percent, and energy prices fell by 6.1 percent.
This made the core inflation rate in the euro zone – HICP excluding energy and food – recorded a year-on-year increase of 6.6%, although it was 0.2 percentage points slower than June’s 6.8%, but still higher than market expectations of 6.5%.
Last week, the European Central Bank raised interest rates for the ninth time in a row, and this cycle has raised interest rates by 425 basis points. President Lagarde said at the monetary policy decision conference that the inflation rate in the euro zone is expected to decline further this year, but may exceed the medium-term target of 2% for a long time.
Lagarde also warned at the time that there was high uncertainty regarding economic growth in the euro area, “due to weak demand. High inflation and tighter financing conditions are holding back spending, which is weighing on manufacturing in particular, which is also affected by external demand. In addition, housing and business investment have also shown signs of weakness, and the economy is expected to remain weak in the short term.”
Still, Lagarde said on Sunday that even if the ECB hits the “pause button” at its next monetary policy meeting, another rate hike is still possible in the future. The ECB’s next monetary policy meeting will be held in September.
ING and others believe that the last interest rate hike may be later this year. At the same time, a considerable number of economists believe that the central bank’s unprecedented rate hike has come to an end.
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