Euro-area growth holds at 0.4 per cent as trade and costs pull apart
The euro area grew 0.4 per cent and widened its June trade surplus, while German wholesale prices rose 5.3 per cent and ECB economists measured divergent corporate subsidies.
Economics & Markets··Evening
Second-quarter growth holds at 0.4 per cent
Eurostat’s flash estimate puts second-quarter GDP up 0.4 per cent in the euro area and 0.5 per cent in the European Union against the previous quarter, with employment up 0.1 per cent in both. Measured against a year earlier, GDP rose 1.0 per cent in the euro area and 1.2 per cent in the EU. Employment was 0.5 per cent higher than a year earlier in both areas. Among member states, Slovenia grew 1.8 per cent on the quarter, Lithuania 1.7 per cent and Sweden 1.4 per cent, while Belgium and Austria were flat. The estimate draws on member-state data covering 99 per cent of euro-area and EU output. The quarterly pace stays moderate; employment gains lag output growth and the annual employment rise is 0.5 per cent. The country split is uneven: several smaller economies lead quarterly growth while two members are flat.[1]
June’s trade surplus and German wholesale prices
According to Eurostat, the euro area recorded a surplus of 8.6 billion euros in goods trade in June, against 4.8 billion euros a year earlier. In the EU the surplus came to 3.9 billion euros, down from 5.2 billion euros. Euro-area exports rose 14.4 per cent from a year earlier to 272.5 billion euros and imports 13.1 per cent to 264.0 billion euros. EU exports grew 12.5 per cent to 241.5 billion euros and imports 13.5 per cent to 237.7 billion euros. The wider euro-area surplus is attributed mainly to chemicals and related products, with manufactured goods and food and drink contributing. Germany’s Federal Statistical Office said selling prices in wholesale trade were 5.3 per cent higher in July than a year earlier and 0.2 per cent above June. Destatis attributes most of the increase to the conflict in Iran and the Middle East, which lifted wholesale prices of energy products and raw materials. Mineral oil products cost 24.1 per cent more than a year earlier and 4.0 per cent more than in June; non-ferrous metals and ores rose 27.8 per cent, chemical products 13.1 per cent and information and communication equipment 9.0 per cent. Live animals fell 18.5 per cent, dairy produce, eggs and edible oils 9.4 per cent and meat products 6.1 per cent. The external surplus widens while German wholesale costs climb through energy and metals.[2], [3]
In a blog post, five ECB economists estimate that subsidies covered 2 per cent of Chinese firms’ costs in 2024, against 1.4 per cent in the United States and 0.6 per cent in the euro area. Global subsidies reached 108 billion dollars in 2024, close to double the level recorded after the financial crisis. Support is heaviest in strategic industries: on a five-year average it covers 3.9 per cent of costs in semiconductors and 3.6 per cent in solar panels, against 0.8 per cent in the car industry. The authors find a positive correlation between subsidy intensity and foreign revenues across Chinese industries, and estimate that subsidies contributed four to fourteen times more to export growth in strategic sectors than in the aggregate. Their conclusion keeps two things apart: aggregate imbalances follow national saving and investment gaps, while subsidies can reshape trade inside those sectors and leave partners with job losses and adjustment costs. Euro-area quarterly growth of 0.4 per cent and the wider June surplus sit with German wholesale cost pressure and the subsidy gap the ECB economists measure.[4], [1], [2], [3]
