LUXEMBOURG: The eurozone economy’s slight growth in the second quarter (2Q) was driven by inventories and government and household spending.
Output between April and June rose 0.1% from the previous three months, Eurostat said last Friday.
That’s in line with an estimate from mid-August and the expectations of analysts in a Bloomberg survey.
Inventory build-up contributed 0.5 percentage points to growth, while government and households also added support, according to the statement.
Net trade and investment detracted from expansion.
At the start of 2025, the economy had surprised with growth of 0.6%, though this was mainly due to strong output in Ireland and tariff-related front-loading that reversed in 2Q.
“The inch higher in 2Q gross domestic product came down to eurozone firms engaging in a rapid restocking cycle of their own,” said Ross Cioffi of Moody’s Analytics.
“All in all, we are not expecting much better performance in 3Q.”
The data come just days before the next European Central Bank (ECB) interest-rate decision, with officials widely expected to leave borrowing costs unchanged for a second time.
Most policymakers see borrowing costs in a good place, with inflation hovering around the 2% target and the economy so far resilient to headwinds ranging from trade to wars.
Business confidence improved recently, and a years-long manufacturing slump is nearing its end.
Economists no longer expect another rate cut, according to a Bloomberg survey published earlier last Friday.
As recently as mid-August, they had anticipated another reduction.
Investors are also no longer fully pricing in such a move. This week’s ECB meeting will include new projections.
Officials are expecting no major revisions to the June round that foresaw growth of 0.9% in 2025, accelerating to 1.1% and 1.3% over the next two years.
Separate data published last Friday showed eurozone compensation per employee rose 3.9% in the second quarter from a year earlier.
That’s slightly lower than the revised 4% reading in the previous period, according to an ECB gauge based on Eurostat figures.
Bloomberg senior economist David Powell said: “The ECB will probably view the time series as another sign that it’s close to victory in its battle against inflation, allowing it to lower rates again in December – after a pause in September – as the damage to the eurozone economy from the rise in US tariffs becomes more visible.” —Bloomberg
