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2025-07-30 17:01:53
Eurozone Economic Mist: Can Q2 Data Reveal a New Normal? ⑴ Eurozone economic growth in the second quarter exceeded consensus expectations, with GDP growing by 0.1% quarter-over-quarter, better than the market's previous forecast of a flat performance. ⑵ This suggests that eurozone businesses are gradually adapting to trade uncertainty, potentially reducing the need for further ECB interest rate cuts to stimulate the economy. ⑶ Looking at annual data, the eurozone economy expanded by 1.4% year-over-year, also exceeding market expectations of 1.2%. ⑷ Specifically for member states, Spain's economy grew strongly by 0.7% quarter-over-quarter, and France also achieved an unexpected 0.3% growth, effectively offsetting the weaker growth of 0.1% in Germany and Italy, respectively. ⑸ Although the 0.6% growth figure for the first quarter was slightly higher due to the advancement of some imports, combined with data from the first two quarters, the eurozone economy remains resilient, consistent with the solid improvement in the services sector and the continued recovery in the manufacturing sector, as shown in the latest PMI data. ⑹ In addition, the trade agreement reached between the United States and the European Union, as well as trade agreements with major economies such as Japan and the United Kingdom, further reduced uncertainty and boosted growth prospects. 7. Although these agreements could result in additional tariffs of 0.2% to 0.4% annually, economists generally believe this impact has already been factored into most forecast models. 8. Germany plans to significantly increase budget spending on infrastructure and defense starting next year, which will provide a boost to economic growth and further offset the impact of tariffs. 9. Given the resilience of the economy, financial investors generally believe that the European Central Bank is nearing the end of its easing cycle after lowering its key interest rate to 2% over the past 13 months. 10. The market currently only expects a 50% chance of another rate cut in December this year, while there is a slight expectation that interest rates may rise by the end of 2026 as the economy accelerates and inflationary pressures recover.
