The euro area grew as its trade surplus widened and China's support drew scrutiny
The euro area grew 0.4 per cent in the second quarter and its goods surplus widened, while ECB research quantified the competitive pressure created by China's support for strategic sectors.
Economics & Markets··Midday
Quarterly growth at 0.4 per cent
Eurostat's flash estimate put second-quarter gross domestic product 0.4 per cent higher in the euro area and 0.5 per cent higher in the European Union than in the previous quarter. Growth over the year was 1.0 per cent in the euro area and 1.2 per cent in the EU, while employment rose 0.1 per cent on the quarter and 0.5 per cent on the year. In the same quarter the United States grew 0.4 per cent on the quarter and 2.1 per cent on the year, matching the euro area's quarterly pace but running ahead annually. Among member states the fastest increases were in Slovenia at 1.8 per cent, Lithuania at 1.7 per cent and Finland at 0.9 per cent, while Belgium and Austria were flat. The euro area and EU estimates for the previous quarter were not revised in this release. The numbers describe a euro area still expanding, with little spare room if external demand or domestic employment softens.[1]
An 8.6 billion euro goods surplus in June
Eurostat data show euro area exports of 272.5 billion euros and imports of 264.0 billion euros in June, leaving a surplus of 8.6 billion euros against 4.8 billion euros a year earlier. Exports rose 14.4 per cent and imports 13.1 per cent over the year, so both sides of the ledger expanded and the surplus still widened because exports outpaced imports. Across the European Union exports rose 12.5 per cent to 241.5 billion euros and imports 13.5 per cent to 237.7 billion euros. The EU surplus narrowed to 3.9 billion euros from 5.2 billion euros a year earlier, a deterioration attributed mainly to a larger energy deficit. The euro-area improvement and the EU-wide narrowing can sit side by side: the currency-area goods balance improved while the broader Union paid more for energy. June's euro-area surplus isolates goods flow from the energy drag that compressed the twenty-seven-member balance: the euro area sold more abroad than it bought, by a wider year-earlier margin.[2]
China's strategic-sector support put into numbers
A study published on the European Central Bank's blog finds that government support reached 108 billion dollars worldwide in 2024, nearly double its level since the financial crisis. China covers 2 per cent of domestic firms' costs through subsidies, against 1.4 per cent in the United States and 0.6 per cent in the euro area. The study, by Maria Grazia Attinasi, Lukas Boeckelmann, Isabella Moder, Til Pommer and Tajda Spital, puts subsidy intensity at 3.6 per cent to 3.9 per cent in semiconductors and solar panels and about 0.8 per cent in cars, with wind turbines, fertilisers and chemicals also among the supported areas. In strategic sectors subsidies are estimated to have contributed between four and fourteen times more to export growth than across the sample as a whole, and the relationship is much weaker in the United States and the euro area. The authors write that industrial subsidies alone are unlikely to drive aggregate global imbalances but may meaningfully reshape trade within strategically important sectors, imposing adjustment costs such as job losses on trading partners and feeding trade tensions. Read against the same week's growth and surplus prints, the research frames competitive pressure under still-growing output when rivals' costs are publicly supported at a higher rate in sectors partners prioritise.[3]
