France’s economy grew faster than what was anticipated and is expected to further improve again in the third quarter.
In the western region of France, the introduction of the world’s second largest cruise ship has acted as a catalyst lifting France’s economy in the second quarter as per official data. The data also showed that Germany is heading into a recession.
The cruise ship operator Royal Caribbean is built in Saint Nazaire, is a commune in the Loire-Atlantique department in western France. The Utopia of the Seas added €1 billion (£840 million) to the French output. This in turn helped in increasing trade growth to 0.6% in the three months to the end of June and gross domestic product to 0.3%.
The eurozone expanded by 0.3% in the third quarter, following a revised pace of 0.3% in the first, prompting many analysts to conclude that the eurozone’s 20 members have turned a corner after flirting with recession in 2023.
Spain is leading and powering through with a 0.8% growth rate in the second quarter while on the other hand, Italy’s recovery was stuck by a 0.2% rise in GDP.
Germany is the largest eurozone economy that slid back and contracted while recording a 0.1% fall in the output, federal statistics office Destatis said, after expanding by 0.2 percent in the first quarter.
The drop in the German economy was unexpected and shrank in the second quarter as per preliminary data. It is predicted to fall further more as recovery takes a hold all across the eurozone. The second-quarter data surprised analysts surveyed by FactSet who had forecast a 0.1% increase.
There was a noticeable decline in equipment and construction investment from the period of April to June. Germany, a typical generator of European growth, was the only major advanced economy to contract in 2023 due to high inflation, an industrial slowdown, and declining export demand.
A series of indications suggested that a recovery was underway at the start of the year, but poor data in recent weeks has dampened expectations for a robust return.
A senior economist at the Centre for Economics and Business research consultancy, Pushpin Singh stated that the growth rate of the eurozone turned out to be better than what was predicted by the City analysts. He suggests the bloc has turned a corner since the start of the year.
Driven by the recent policy loosening by the European Central Bank and anticipation for the further interest rate cuts down, the prospects are likely to improve further throughout the year.
A senior economist at the Dutch Bank ING, Bert Colijn was extra concerned that the falling growth rate of Germany may become a significant reason for the eurozone’s dropping economy.
Colijn said Germany continues to remain the weaker link compared to the rest in the eurozone post pandemic. If you take out Spain, you’re left with an economy that grows at a very slow rate, he added.
The French economy grew faster than what was anticipated and is expected to further improve again in the third quarter. This may happen if the Olympics increase consumer spending, dispelling fears that a gridlock in the French parliament following recent elections will throw the economy off track.
Bruno Le Maire, the finance Minister of France said that the Paris Games and the economy’s performance in the second quarter indicated growth. They also forecast that these may be the reasons for growth this year and it would probably exceed the outgoing government’s 1% forecast.
Le Maire stated that we would most likely see growth that is higher than the 1% projected in February. France has outperformed for two years proving their economic policies by giving tangible results, he added.
He went on to say that better-than-expected growth may help France’s difficult budget deficit, but that the country needed to keep focused on spending cuts.
Anja Sabine Heimann, an economist at HSBC Germany, said industrial orders were sluggish and German consumers were hesitant to spend, adding that the prospects of a recession were “elevated”.
Over the last two years, the country has experienced nearly zero growth and narrowly avoided a recession.