Eurozone Grows 0.4% in Q2 Despite Middle East Energy Shock

Eurozone’s second quarter growth of 0.4% defied expectations amid a Middle Eastern energy shock.

Shock Footprint: Energy Price Volatility

■Oil prices fell 15% in the first half of 2024, counterbalanced by robust consumer demand.

■Natural gas rose 12%, with supply strains persisting in regions supplying 35% of Europe’s energy needs.

■Price swings pushed the commodity price index up 4%.

Resilient Growth: Sectoral Diversification

■Manufacturing expanded 0.7%, led by automotive and electronics.

■Services grew 0.3%, buoyed by tourism and financial subsectors.

■Agriculture and food production added 0.2%, narrowing the trade deficit.

ECB’s Rate Path: What to Expect?

■The ECB is likely to keep the policy rate at 3.75% through Q4 2024.

■Inflation remains near the 2% target, with the new price‑stability report projecting 1.8% for 2025.

■Market uncertainty rises around the policy’s “gradual” stance.

Regional Divergence: Germany, France, Italy

■Germany: 0.5% growth, a 1.2% rise in industrial output.

■France: 0.3% growth, a 0.4% uptick in services.

■Italy: 0.1% growth, a 0.7% decline in the trade deficit.

Investor Focus: Where Are the Eyes?

■Euro: 1.2% appreciation against the USD, a 0.3% rise.

■Stock indices: DAX, CAC 40 and FTSE 100 climbed 0.6–0.8%.

■Bond markets: 10‑year Eurozone yields rose 0.15% to 3.1%.

Markets are balancing the stronger-than-expected growth and resilience to energy shocks with the ECB’s gradual rate policy, while investors concentrate on long‑term growth prospects.