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Euro zone economic system grows 0.7% within the second quarter regardless of fuel disaster and inflation surge

Development within the euro zone economic system accelerated within the second quarter of the 12 months, however the area’s prospects get hit as Russia continues to cut back fuel provides.

The 19-member bloc registered a gross home product charge of 0.7% within the second quarter, in accordance with Eurostat, Europe’s statistics workplace, beating expectations of 0.2% progress. It comes after a GDP charge of 0.5% within the first quarter.

The numbers distinction sharply with the detrimental annualized readings out of america for each the primary and second quarter, because the euro zone continues to profit from the reopening of its economic system after the pandemic.

Nevertheless, a rising variety of economists predict the euro zone to slip right into a recession subsequent 12 months, with Nomura, for instance, forecasting an annual contraction of 1.2% and Berenberg pointing to a 1% slowdown.

Even the European Fee, the chief arm of the EU, has admitted {that a} recession may very well be on the playing cards — and as early as this 12 months if Russia utterly cuts off the area’s fuel provides.

Officers in Europe have turn into more and more involved about the potential of a shutdown of fuel provides, with European Fee President Ursula von der Leyen saying Russia is “blackmailing” the area. Russia has repeatedly denied it is weaponizing its fossil gas provides.

Nevertheless, Gazprom, Russia’s majority state-owned vitality big, diminished fuel provides to Europe by way of the Nord Stream 1 pipeline to 20% of full capability this week. General, 12 EU international locations are already affected by partial disruptions in fuel provides from Russia, and a handful of others have been utterly shut off.

European Economics Commissioner Paolo Gentiloni mentioned the most recent progress figures had been “excellent news.”

“Uncertainty stays excessive for the approaching quarters: [we] want to keep up unity and be prepared to answer an evolving scenario as mandatory,” he mentioned.

The GDP readings come at a time of document inflation within the euro zone. The European Central Financial institution hiked rates of interest for the primary time in 11 years earlier this month — and extra aggressively than anticipated — in an effort to deliver down shopper costs.

Nevertheless, the area’s hovering inflation is being pushed by the vitality disaster, which means additional cuts of Russian fuel provides might push up costs much more.

“Given the difficult geopolitical and macroeconomic components which have been at play over the previous few months, it is constructive to see the eurozone expertise progress, and at the next charge than final quarter,” Rachel Barton, Europe technique lead for Accenture, mentioned in an e-mail.

“Nevertheless, it is clear that persistent provide chain disruption, rising vitality costs and record-breaking ranges of inflation can have a longer-term affect.”

In the meantime, Andrew Kenningham, chief Europe economist at Capital Economics, mentioned Friday’s GDP determine would mark “by far the most effective quarterly progress charge for some time.”

“Certainly, information that inflation was as soon as once more even greater than anticipated solely underlines that the economic system is heading for a really tough interval. We anticipate a recession to start later this 12 months,” he added.

Eurostat additionally revealed revised inflation figures Friday, placing annual inflation at 8.9% in July, up from 8.6% in June.

This text was initially revealed by cnbc.com. Learn the authentic article right here.

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