Eurozone: GDP growth weakens further, inflation higher to 2.1% – ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone economy grew by just 0.3% QoQ in the second quarter with inflation increasing to above 2%.

Key Quotes

“Perhaps still temporary, but factors with a longer shelf life seem to have brought Eurozone GDP growth down to a lower cruising speed for the moment.”

“The confidence impact of a trade row and weaker real household income growth seem to be spoiling the European party for the moment.”

“Trade uncertainty seems to have already had a significant effect on the Eurozone economy in Q2.”

“Lower consumer confidence has taken some of the wind out of the sails from consumption growth.”

“Inflation remained high despite the weaker growth path that the Eurozone economy is on in 2018 but mainly driven by higher energy prices. The energy index increased by 9.4% YoY.”

“The core rate picked up to 1.1%, which is where it was in May as well. This is still weak and very much in line with ECB expectations.”

“The weaker cyclical picture and low core inflation provide little reason for the ECB to increase rates before autumn next year. Any “behind the curve” thoughts that surfaced earlier this year when the mood was still Europhoric can be parked for the moment.”