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The
stronger growth came despite stagnation in the bloc's biggest
economy Germany, where high inflation and fears of a gas crisis
triggered by the war in Ukraine have caused consumer and
business sentiment to plummet, economists said.
The EU's statistics office said euro zone gross domestic product
rose 0.7% quarter-on-quarter in the April-June period for a 4.0%
year-on-year gain, strongly beating expectations of a 0.2%
quarterly and 3.4% annual gain.
Meanwhile, inflation rose to another record high in July and its
peak could still be months away, keeping pressure on the
European Central Bank to opt for another big interest rate
increase in September.
Consumer price growth in the 19 countries sharing the euro
currency accelerated to 8.9% in July from 8.6% a month earlier,
far above expectations for 8.6% and well clear of the ECB's 2%
target, Eurostat said.
"The acceleration in economic growth is mainly due to reopening
effects and masks underlying weakness due to high inflation and
manufacturing problems," ING economist Bert Colijn said.
"From here on, we expect GDP to continue a downward trend as the
services reopening rebound moderates, global demand softens and
purchasing power squeezes persist. We expect that to result in a
mild recession starting in the second half of the year," he
said.
The poor performance of the German economy was offset by much
stronger than expected expansions elsewhere in the bloc with
France's economy growing 0.5% on the quarter, Italy expanding by
1.0% and Spain achieving a 1.1% increase.
"However, it’s clear that persistent supply chain disruption,
rising energy prices and record-breaking levels of inflation
will have a longer-term impact," said Rachel Barton, Europe
economist at Accenture.
The good euro zone growth performance in the second quarter
combined with the rising inflationary pressure increased the
probability that the ECB would raise interest rates by 50 basis
points again in September, rather than go for a smaller hike.
"With inflation not showing any signs of cooling off in the
short term and with the economic outlook not yet derailing, we
expect another 50bps increase in September from the ECB," Nicola
Nobile at Oxford Economics said.
Looming over all of Europe's economies is the war in Ukraine.
Uncertainty over the course of the conflict has knocked consumer
and business confidence while fears remain that a full cut-off
of Russian gas supplies would plunge the bloc into a much deeper
downturn.
(Reporting by Jan Strupczewski; Editing by Toby Chopra)
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