By John Fahey
Today sees the release of the first estimate of eurozone GDP figures for the second quarter of the year.
The market consensus is for quarterly growth of 0.4%, which would equate to yearly growth of 2.2%.
This is a somewhat slower pace of growth compared to 2017. The eurozone economy registered softer but still solid 0.4% growth in the first quarter of the year.
This followed three quarters of 0.7% rises last year. In year-on-year terms, the economy expanded 2.5% in the opening three months of 2018.
For 2017 as a whole, eurozone GDP averaged 2.4%.
Leading indicators of activity for the second quarter suggested growth continued at a solid pace.
The limited hard data available for the second quarter are consistent with ongoing solid growth.
Retail sales increased by a modest 0.4% in April/ May versus quarter one, in which they were flat.
Meantime, industrial production, which has been volatile in recent months, declined 0.2% in April/May after falling by 0.6% in quarter one.
The goods trade data for April/May have been encouraging, suggesting external trade could make a positive contribution to growth in the second quarter, after being a drag on growth in the first quarter.
The labour market has continued to improve. The eurozone jobless rate fell to 8.4% in April, and held there in May.
This represents its lowest rate since December 2008. On the inflation front, underlying price pressures in the currency bloc remain subdued.
At 1.2% in June, core inflation is well below the ECB’s 2% target.
The July survey data released so far have supported the view that growth continues at a reasonable pace at the start of the third quarter.
The ECB last week said recent economic data have been in line with its June economic forecasts of 2.1% growth this year.
The eurozone economy still faces some challenges and risks.
Unemployment remains high in many countries, productivity growth is weak, while there are a host of legacy issues from the global downturn.
Political developments also remain a concern, with anti-establishment parties having success in a number of countries and Brexit-related uncertainty increasing.
The protectionist trade policies of the US are also a cause for concern.
Overall, the economy is expected to continue expanding at a solid pace as ECB monetary policy remains very accommodating.
John Fahey is a senior economist at AIB
