Euro-Zone Q2 GDP Growth Rises to 2.1% Y/Y, EUR/USD Dips

Lucy Hill
August 1, 2017

"The economy is recovering and the labor market is doing quite well, but we think core inflation will be at 1 percent and below for the rest of 2017", said Marco Wagner, economist at Commerzbank.

In its latest forecasts, released in July, the International Monetary Fund estimated the euro zone would grow 1.9 percent this year and 1.7 percent in 2018, above Britain's projected growth of 1.7 percent this year and 1.5 percent next.

Today's data is yet another sign that the Eurozone is going from strength to strength this year, with the bloc's economic recovery picking up the pace in recent months.

The price of industrial goods outside the energy sector rose 0.5% from 0.4% the previous month while the services-sector inflation rate slowed slightly to 1.5% from 1.6%.

It intends to begin the process in the autumn, although inflation remains low at 1.3%, well under the 2% target for the eurozone. "Except Germany, if you look at France, Italy, Spain or Portugal there are still overcapacities, still relatively high unemployment".

The euro EUR= has rallied more than 12 percent year to date and is holding at two-and-a-half year peaks.

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"Our outlook reflects several positive factors: generally supportive fiscal policies - or expectations of them - in most developed market economies, easier financial conditions since the start of the year, positive animal spirits as indicated by consumer and business confidence data, and a rebound in global trade".

Of course a stronger euro could dampen euro area growth and cap inflation, a further issue for European Central Bank policymakers to consider.

Officials will have ample time to ponder economic data and policy options ahead of their September 7 meeting, and probably even thereafter.

This was the lowest rate recorded in the eurozone since February 2009.

Meanwhile, the EU28 unemployment rate was 7.7% in June, down from 8.6% in the same time a year ago.

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