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Eurozone health check: growth is up but so is inflation

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There were mixed signals on the health of the euro-zone economy today, as new data showed better-than-expected growth but higher-than-expected inflation.

The “flash” estimate for the second quarter showed gross domestic product rose 0.7 percent, compared to 0.5 percent in the previous three months, driven by strong performance from a reviving tourism sector, especially in Spain ( with a growth of 1.1 percent). ) and Italy (1 percent).

Column chart of quarter-on-quarter change in GDP (%) showing eurozone growth beating expectations and accelerating

Economists also welcomed a strengthening of the Spanish labor market, where unemployment has reached its lowest level since 2008. An increase in permanent jobs followed recent reforms aimed at reducing the high proportion of the workforce on temporary contracts.

France reported growth of 0.5 percent that was higher than forecast, thanks to strong exports and a boost from tourism, tempered by concerns that domestic demand will remain stable.

German growth was also flat, as household and government spending helped boost economic activity, despite the higher costs of oil and gas imports. However, concerns remain that further pressure on gas supplies from Russia could plunge the country into recession.

Eurozone inflation, meanwhile, accelerated from 8.6 percent in June to 8.9 percent in July, thanks to a 40 percent rise in energy prices and a 10 percent rise in food costs. Removing these volatile items resulted in an increase of 4 percent – still double the ECB’s target of 2 percent.

In Germany, the eurozone’s largest economy, inflation rose in July from 8.2 percent in June to 8.5 percent in July, fueled by a 14.8 percent rise in food prices.

The war in Ukraine – and the gas crisis in particular – means that the outlook for the eurozone in the second half of the year is bleak, looking even bleaker given the turmoil in Italian politics. According to data from the European Commission, consumer confidence is already at its lowest level ever.

Today’s inflation data raises the likelihood that the European Central Bank, which last week raised interest rates for the first time in more than a decade, will announce another 50 basis points in September.

Compare rising prices per country with our global inflation tracker

Latest news

  • Oil prices increase of $4 per barrel as Opec+ supply opportunities diminish (Reuters)

  • US consumer confidence remains close to record low

  • RMT union members at Arriva Rail London vote for strike action (PA)

For current news updates, visit our live blog

Need to know: the economy

New inflation and wage data offered little relief for the US Federal Reserve after it raised interest rates by 0.75 points for the second consecutive month on Wednesday. The core personal consumption expenditure index, the Fed’s preferred measure of inflation, rose 1 percent in June, bringing the annual rate from 6.3 percent to 6.8 percent. Taking out volatile items like food and energy, the “core” PCE rose 4.8 percent, still more than double the Fed’s target.

It follows yesterday’s news that the US economy shrank 0.9 percent year-on-year for the second quarter in a row. US economics editor Colby Smith addresses the big question: Is the US in a recession? (TLDR: It depends.)

Latest for UK and Europe

Consumer loans in the UK doubled last month, according to the Bank of England, as people resorted to credit cards and other forms of debt to cope with the rising cost of living.

The future of British economic policy continues to dominate the hunt for the next prime minister. Bookmakers’ favourite, Liz Truss, rejected the idea of ​​further windfall taxes on energy companies, even if centerBritish Gas owner and the country’s largest energy retailer has reinstated its dividend, reporting that corporate profits have more than quintupled during the energy crisis.

Poor productivity is recognized as one of the main problems holding the UK back. Columnist Tim Harford turned to Legoland for inspiration, but bemoaned the fact that his strategy of focusing on the good stuff and “pushing the rest into memory” now appears to be the central plank of government strategy.

Worldwide last

US President Joe Biden is set for two key legislative victories ahead of the November midterm elections. A $280 billion package authorizes subsidies for the semiconductor industry, while a sweeping bill for tax, climate and social spending also appears to be passed.

Argentina has appointed a third official in less than a month to take over the country’s troubled economy. Sergio Massa, a Peronist leader in Congress, will be responsible for a ministry that oversees economic, manufacturing and agricultural policies.

Companies and investors leave most Latin Americastock markets, writes LatAm editor Michael Stott, due to a decade of sluggish growth, weak currencies and bad headlines. At the end of 2012, the region accounted for just 6.4 percent of MSCI’s global emerging market stock index — less than a third of its weight in 2010.

ChinaThe country’s central bank has proposed an ambitious effort to revive the debt-ridden real estate sector with a $148 billion bailout for real estate projects. The real estate crisis played a major role in pushing economic growth back to just 0.4 percent in the second quarter.

Need to know: business

Positive results from Great technology Equity markets set the course for their best month since November 2020. The most recent come from Amazon, which reported better-than-expected earnings and an improved outlook, and from Apple, which showed revenue growth despite supply chain problems in China. However, Intel reported an unexpected drop in revenue and lowered its forecasts, causing its stock to plummet.

Energy is the other notable sector as companies reap the dividend from rising prices. ExxonMobil and Chevron both reported record quarterly earnings, while Shell broke its earnings record for the second quarter in a row, announcing a $6 billion share buyback.

British Airways older IAG reported its first gain since the pandemic struck, despite ongoing disruptions across the industry. In the U.S, southwest posted record profits as demand rose, but warned of trouble ahead. JetBlue agreed to buy rival Spirit for $7.6 billion to create the fifth-largest U.S. carrier, though the deal could face regulatory issues.

Mechanic results indicated strong demand at the top end of the market. Renault raised its forecasts as it focuses on more expensive models, while Bentley reported higher profits thanks to the sale of its luxury vehicles. Stellantis – producer of the Jeep, Alfa Romeo, Peugeot and Fiat brands – was able to get rid of supply problems to raise prices and increase net profit by a third.

There was less good news for UK car production, as the global chip shortage means it won’t return to producing 1 million vehicles a year until at least 2025 – two years later than expected. Losses at Aston Martin have skyrocketed due to supply chain bottlenecks.

Meanwhile, another sector that is benefiting from the demand for luxury items is the beverage market, where: Diageo benefits from booming sales of “super premium plus” spirits brands such as Don Julio tequila and Bulleit bourbon.

Colgate became the last major consumer group to announce price increases because it passed on rising costs to customers. nest yesterday said rising prices by 6.5 percent had enabled it to raise its sales forecast for the year. Hershey also seems to have gotten away with raising prices.

Finish science

The last wave of Covid cases in England, Wales and Scotland, powered by the BA.5 variant, appears to be retreating, according to official data. In the week to July 20, about one in 20 people became infected, compared to one in 17 the week before. The data is collected from private households and excludes infections in hospitals or care homes.

There is a strong increase in obesity in many countries during the pandemic due to reasons such as disrupted routines and increased stress. Chief data reporter John Burn-Murdoch says it’s time to shift the focus from individual responsibility to how we live and work.

Chart showing that stress, poverty and a perceived lack of control over one's life and work can increase the likelihood of weight gain

A new report has put a price on the economic impact of long Covid in the United Kingdom. On average, patients lost about £1,100 a month in revenue, which amounts to £1.5 billion in total across the economy. Official data for May showed that about 2 million people had persistent Covid symptoms.

Business results this week offered some clues about the development of Covid vaccines and therapies. from Pfizer Paxlovíd antivirals are one of the fastest-selling drugs in history, with annual sales expected to reach $22 billion this year. However, there could be a surplus of 70 million doses by the end of the year as patient absorption slows.

Strong sales of the evusheld Treatment with antibodies to Covid-19, which helps protect people who do not respond to vaccines, gave AstraZeneca a boost in the first half of the year. Sales reached $445 million, nearly equal to revenue from the company’s vaccine developed with the University of Oxford. However, sales of Evusheld are expected to increase, unlike sales of the jab.

Covid cases and vaccinations

Total number of worldwide cases: 568.7mn

Total Doses Administered: 12.3 billion euros

Get the latest global photo with our vaccine tracker

What good news

The commonwealth games, which kicked off this morning in Britain’s second city, Birmingham, is seen as a huge step forward for athletes with disabilities. Unlike other major events, the Parasport program is fully integrated with all medals contributing to the grand total for each country. Here are the BBCs tips on what to watch.

Hannah Cockroft
GB Paralympic Champion Hannah Cockroft, seen here in a 2013 race, makes her Commonwealth Games debut at the T33/34 100m © Suzanne Plunkett/Reuters

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