Major EU economies report mixed Q2 performances amid high inflation

This photo taken on July 27, 2023 shows the Euro sign in Frankfurt, Germany. (Xinhua/Zhang Fan)

According to data firm Statista, the inflation rate in the EU was 6.4 percent in June, with prices rising fastest in Hungary, which had an inflation rate of 19.9 percent. The inflation rates in France, Germany, Ireland, and Sweden stood at 5.3 percent, 6.8 percent, 4.8 percent and 6.3 percent, respectively.

STOCKHOLM, July 29 (Xinhua) -- Major European Union (EU) economies have reported mixed second quarter (Q2) performances recently amid still high inflation levels across the bloc.

France on Friday reported a 0.5-percent increase of gross domestic product (GDP) in volume terms in Q2, after a 0.1 percent growth in the previous quarter, the country's National Institute of Statistics and Economic Studies (INSEE) said.

The INSEE said in its preliminary report that foreign trade was a key driver of the growth, while exports bounced back and imports improved. However, as household consumption decreased in the quarter, final domestic demand (excluding inventories) in France contributed again negatively to the GDP growth.

A man walks past a hotel in Stockholm, capital of Sweden, July 26, 2023. (Photo by Wei Xuechao/Xinhua)

Germany reported on Friday stagnated GDP growth in Q2, after two quarters of economic contraction. Preliminary figures published by the Federal Statistical Office (Destatis) showed that such stagnation was preceded by contractions of 0.4 percent and 0.1 percent in the final quarter of 2022 and the first quarter of this year, respectively.

"There are slightly positive trends in private consumption and investment, but this is not enough, and it is anything but satisfactory," Germany's Minister for Economic Affairs and Climate Action Robert Habeck said in a statement on Friday.

"Germany is facing a mountain of major challenges," Siegfried Russwurm, president of the Federation of German Industries (BDI), warned last month, stressing that more and more companies were leaving because the costs, speed and bureaucracy "are simply not affordable for them in comparison."

The German government is currently weighing possible solutions to boost the country's economy. Habeck sees the need for a "targeted stimulus for investment and scope for our energy-intensive industry."

A man walks past a shop in Stockholm, Sweden, June 22, 2023. (Xinhua/He Miao)

In Ireland, the GDP increased by 2.76 percent in Q2 year-on-year, according to an early estimate released by the country's Central Statistics Office (CSO) on Friday. The office said that the growth was mainly driven by the industrial and the information and communication sectors, all of which are dominated by multinational companies in the country.

Up north in Sweden, the country's GDP contracted by 2.4 percent in Q2 year-on-year, Statistics Sweden said on Friday. The sharpest drop in the quarter was registered in June, when GDP was down 3.6 percent compared with the same month last year.

"There is more than one underlying component explaining the decrease, but one factor in the last month of the quarter was a decline in (the) exports of goods,"Mattias Kain Wyatt, an economist at Statistics Sweden, said in a press release.

According to data firm Statista, the inflation rate in the EU was 6.4 percent in June, with prices rising fastest in Hungary, which had an inflation rate of 19.9 percent. The inflation rates in France, Germany, Ireland, and Sweden stood at 5.3 percent, 6.8 percent, 4.8 percent and 6.3 percent, respectively.

To curb the still high inflation levels, the European Central Bank (ECB) raised its key interest rates by 25 basis points (bps) on Thursday, with the interest rates on the main refinancing operations, on the marginal lending facility and on the deposit facility increased to 4.25 percent, 4.50 percent and 3.75 percent, respectively, with effect from Aug. 2.

People queue to enter the European Commission building during the Open Day of the European institutions in Brussels, Belgium, May 6, 2023. (Xinhua/Zheng Huansong)

According to the ECB's most recent prediction, inflation in the eurozone is predicted to be 5.4 percent in 2023, 3 percent in 2024, and 2.2 percent in 2025.

Together with other factors, the tightened monetary policy has weakened the eurozone economy, which according to the ECB is expected to remain weak in the short run before it picks up again.