The eurozone’s gross domestic product (GDP) grew by 0.3% in the second quarter of 2023 compared to the previous quarter, according to a flash estimate published on Monday by Eurostat, the statistical office of the European Union (EU).
Eurozone GDP remained stable in the first quarter of the year compared to the previous one.
The EU’s GDP in the second quarter of 2023 remained stable compared to the previous quarter. It increased by 0.2% during the first quarter of the year.
Countries that recorded the highest quarter-on-quarter GDP growth include Ireland with 3.3% and Lithuania with 2.8%.
Negative quarter-on-quarter growth was registered in Sweden (minus 1.5%), Latvia (minus 0.6%), Austria (minus 0.4%) and Italy (minus 0.3%).
Year-on-year, eurozone GDP increased by 0.6% in the second quarter of 2023, and the EU’s GDP grew by 0.5%.
Both the eurozone and the EU recorded a 1.1% GDP growth in the first quarter of 2023 compared to the same period of time last year.
The eurozone’s 0.3% GDP increase “was better than expected but was also boosted by very strong activity in Ireland, which is known to be volatile on the back of multinational accounting activity. Without Ireland, growth would have been halved,” Bert Colijn, senior economist for the eurozone at ING, said.
According to Colijn, economic activity in the eurozone is going through a sluggish phase as a result of high inflation, weak global demand and monetary tightening.
Colijn warned that recession remains a high risk for the coming quarters, and underlined that differences in the countries’ performance remain quite big. He said he expected manufacturing to be affected by lower demand and the performance of services to also be lower as the effects of the reopening from the COVID-19 pandemic fade away.
Meanwhile, eurozone inflation continues on its downward trend. It stood at 5.3% in July year-on-year, down from 5.5% in June, Eurostat said.
Food, alcohol and tobacco remain the main drivers of inflation in the eurozone (10.8% year-on-year). The price of services increased by 5.6% in July this year, compared to the same month in 2022, up from last month’s 5.4%.
Non-energy industrial goods recorded a 5% yearly inflation in July, compared to 5.5% in June. Energy prices recorded negative inflation of minus 6.1% in July, compared to minus 5.6% in June.
Countries with the highest yearly inflation rate in July included Slovakia (10.2%, down from 11.3%in June), Croatia (8.1%, down from 8.3% in June) and Lithuania (7.1%, down from 8.2% in June).
According to the European Central Bank (ECB), the rate of inflation, despite its recent decline, will “stay above target for an extended period” as underlying inflation remains high overall.
“The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target,” the central bank said in a release last week.
ECB President Christine Lagarde reiterated at a press conference last Thursday following the Governing Council meeting that the interest rate will be the bank’s primary tool to bring down inflation, which the ECB says has remained “too high for too long.”
