Eurozone growth exceeds expectations in second quarter

The Eurozone economy grew faster than expected in the second quarter, pulling out of a pandemic-induced recession, while the easing of coronavirus curbs also helped inflation shoot past the European Central Bank's 2% target in July, Reuters reports.

The European Union's statistics office Eurostat said on Friday that its initial estimate showed gross domestic product (GDP) in the 19 countries that use the euro had expanded 2.0% in April-June from the previous quarter.

Compared to the same period a year earlier, when lockdowns to slow the spread of the coronavirus brought economic activity close to a standstill, GDP jumped 13.7%.

But unlike the U.S. and Chinese economies, which have pulled above their pre-pandemic peaks, the euro zone economy remains some 3% smaller than it was at the end of 2019.

Eurostat also said euro zone inflation accelerated to 2.2% in July from 1.9% in June - the highest rate since October 2018 and above the 2.0% mean expectation of economists.

Economic growth also surpassed a Reuters poll forecast of 1.5% for the April-June quarter and a 13.2% annual increase.

Among the outperformers were the euro zone's third and fourth largest economies, Italy and Spain, with quarterly growth respectively of 2.7% and 2.8%. Portugal's tourism-heavy economy expanded by 4.9%.

Since the start of 2020 the euro zone has twice suffered two consecutive quarters of contraction - defining a technical recession - with coronavirus curbs hitting most recently in the period spanning the end of 2020 and the start of 2021.

Activity was dragged down in the first three months of this year largely by weakness in Germany, where a lockdown from November had curbed private consumption.

Europe's biggest economy returned to growth in the second quarter, but the expansion of 1.5% compared to Q1 showed a weaker rebound than expected.

The French economy, the euro zone's second largest, grew by 0.9%, just ahead of forecasts, with its third lockdown gradually being eased from May.

The strong growth could add to arguments for the ECB to start scaling back its crisis fighting measures.

The central bank's 1.85 trillion euro ($2.20 trillion) Pandemic Emergency Purchase Programme is due to expire in March at the earliest, and policy hawks are already arguing that it is time to start tapering purchases given the bloc's rebound.

Policy doves are warning that the more transmissible Delta variant poses a threat to the recovery, however, so the ECB's Sept. 9 meeting is too early for a firm call on winding down the scheme early next year.

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