Euro area economy grows sequentially in Q2, positive momentum to be maintained in H2

On a quarter-on-quarter basis, the euro area economic growth came in at 0.6 percent in the second quarter, showed a flash estimate by Eurostat. The second quarter seasonally adjusted growth came in line with the consensus expectations of 0.6 percent growth. It was up from 0.5 percent quarter-on-quarter growth recorded in the first quarter.

On a year-on-year basis, the euro area economy expanded 2.2 percent in the second quarter. This is slightly higher than the 2.1 percent year-on-year growth seen in the first quarter and also slightly higher than consensus expectations of 2.1 percent.

There was no expenditure breakdown released today. However, the national data strongly implies that domestic demand mainly drove the second quarter economic growth of the currency bloc, with private consumption, government spending and investment likely making positive contribution, while net trade appears to have been a modest drag for the fourth quarter out of the past five, noted Daiwa Capital Markets Research.

Amongst the member states, the first estimate of Dutch GDP considerably surprised on the upside, growing 1.5 percent quarter-on-quarter after the upwardly revised growth of 0.6 percent quarter-on-quarter in the first quarter. Meanwhile, the flash estimate of the Italian economy came in at 0.4 percent quarter-on-quarter for the third straight quarter. On a year-on-year basis, Italian economy grew 1.5 percent year-on-year, the strongest for six years. This was widely consistent with the performance in France, where the economic output moved sideways at 0.5 percent sequentially for the third straight quarter. On the contrary, the German data released yesterday showed that the economy contributed to be vigorous, moderating by only 0.1 percentage point in the second quarter to a sound 0.6 percent.

The positive economic momentum in the euro area is expected to be greatly maintained through the second half of the year. Despite some mixed messages from July’s confidence surveys, all continue to indicate towards continuing growth at the beginning of the third quarter above the trend of the past few years.

“While we expect to see growth moderate slightly, it should remain strong enough to take full-year growth to more than 2% in 2017, which would be the firmest annual pace for seven years”, added Daiwa Capital Markets Research.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -32.2873, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 40.1896. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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