Data published by Eurostat showed that the eurozone economy grew in 2017’s second quarter and was in line with estimates. Gross Domestic Product (GDP) increased by 0.6 per cent quarter-on-quarter, marginally higher than the 0.5 per cent uptick recorded in the first quarter. The year-on-year GDP growth was revised up slightly from 2.1 per cent to 2.2 per cent. The economy had expanded by 1.9 per cent in the first quarter.
Overall confidence in the short-term eurozone growth outlook will stay solid with monetary policy still very accommodative, though there will be some uncertainties that export growth could weaken following the latest euro gains. In the 28 countries that make up the EU, the economy grew by 0.6 per cent quarterly and by 2.3 per cent yearly.
In the meantime, Italy’s economy grew at a steady rate in the second quarter, experiencing its best growth rate in six years, though still lagging behind most of its peers. Italy’s GDP rose by 1.5 per cent in the second quarter on a yearly basis and by 0.4 per cent on a quarterly basis.
The 1.5 per cent rise is the highest rate seen in six years since the start of 2011 when it was 2.1 per cent. GDP expansion was driven by industry, services and internal demand, while agriculture and external demand dragged down growth. These figures suggest that Italy’s recovery is healthier than previously expected. The Bank of Italy, the country’s central bank, had anticipated a growth rate of 1.4 per cent for 2017.
Finally, in the United States, minutes from the Federal Open Market Committee’s July meeting showed that policymakers “expressed concern about the recent decline in inflation”.
This could lead policymakers to delay future interest rate hikes as well as the balance sheet reduction until it is clear that the trend is transitory. Other officials cautioned that a delay could cause an eventual overshooting in inflation given a tightening labour market.
Low inflation has prompted concerns that the Federal Reserve may have to reduce its monetary tightening pace even though the economy is expanding modestly and the unemployment rate fell to 4.3 per cent in July, matching a 16-year low recorded in May.
This report was compiled by Bank of Valletta for general information purposes only.