Germany’s unexpected contraction in the second quarter of this year was mainly due to a halt in investment in equipment and buildings as the industrial sector continues to weaken under pressure from rising interest rates.
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The second estimate for euro area gross domestic product (GDP) growth rate quarter-on-quarter for the second quarter of 2024 was released, coming in at 0.3%, the same as the previous quarter and in line with expectations.
France’s growth rate for the current quarter was 0.3%, unchanged from the previous quarter, and while the country is expected to see Olympic-led economic growth in the third quarter of the year, continued political uncertainty is likely to limit that growth rate somewhat.
Spain’s GDP growth rate in the second quarter of this year was also 0.8%, unchanged from the previous quarter. Lithuania also grew at 0.9% this quarter, the same pace as in the first quarter of 2024.
Belgium’s GDP fell slightly from 0.3% to 0.2%, while Portugal’s decline was more significant, from 0.8% last quarter to 0.1% this quarter. Other countries that saw a slight decline in growth this quarter included Cyprus, where GDP growth slowed from 1% to 0.7%, and Slovakia, where GDP growth fell from 0.6% to 0.4%.
In Italy, growth slowed slightly to 0.2% in the second quarter of 2024 from 0.3% in the previous quarter. ING estimated that the weakness was due to a decline in net exports and weakness in industry.
Irish economy bucks trend in growth
Meanwhile, Ireland saw stronger growth this quarter, with GDP rising to 1.2% from 0.7% in the first quarter of the year, while Finland also recorded a smaller increase, from 0.2% to 0.4%.
But Germany, the euro zone’s largest economy, unexpectedly contracted by 0.1 percent, compared with 0.2 percent growth in the first quarter of the year.
The second estimate for euro area year-on-year growth in the second quarter of 2024 was 0.6%, in line with the preliminary estimate and up from 0.5% in the previous quarter. This was also the highest growth rate in five quarters.
The euro zone’s economy is expected to expand 0.8% in 2024, according to the European Commission.
Provisional estimates for euro area employment growth in the second quarter of 2024 were also released on Wednesday. Eurostat said the number of employed people in the second quarter rose 0.2% quarter-on-quarter to 170,183,000, in line with analysts’ expectations but down slightly from the 0.3% increase in the previous quarter.
France’s CAC 40 index was up 0.43% on Wednesday morning following the release of GDP and unemployment rates, while Germany’s DAX index was up 0.40%.
German economy unexpectedly slows in second quarter
Germany’s economy unexpectedly contracted in the second quarter of this year, mainly due to a halt in investment in equipment and buildings as the industrial sector continues to weaken under pressure from rising interest rates.
The European Commission said the German economy is expected to expand 0.1% this year, which would mark a recovery from a 0.3% contraction last year as domestic demand starts to gradually pick up.
But investment is still expected to remain well below pre-pandemic levels due to rising financing costs, and exports are also expected to remain weak this year, according to the Federal Statistical Office.
