Euro zone economy expanded by 0.4% on the quarter

The euro zone economy grew faster than expected last quarter as surging investment in AI, ample ​government spending and several one-off factors more than offset a drag from high energy costs and the war in Iran.

The economy of the 21 ‌nations sharing the euro currency expanded by 0.4% on the quarter, above modest expectations for 0.2% in a Reuters poll.

Compared with the same quarter last year, growth in the bloc of 360 million people accelerated to 1.0%, above expectations for 0.5%, as some earlier growth figures were also revised ​up.

Industry, in the doldrums for years, has also held up against high energy costs surprisingly well and may have added to growth, ‌unlike in ⁠previous years, when it was a persistent drag.

Germany, the world’s third-biggest economy, France and Italy all expanded by 0.2% on the quarter, while Spain, the bloc’s outperformer for years now, grew by 0.7%, above expectations for 0.6%. The Netherlands meanwhile expanded by 0.4%, twice the expected rate.

Business investment in AI has been soaring in Europe as well, household consumption has held up against gloomy expectations, and Germany’s government is slowly but ​surely ramping up its long-promised spending on defence and infrastructure.

The bloc also got a boost from 3.9% quarterly growth in Ireland, which was driven by multinational firms in IT and communication that are located there for tax purposes.

Although growth was better than forecast in the quarter, it remains weak and stands in stark contrast to the continuing boom in the U.S., which ​will likely see its economy grow more than 2% this year, fuelled in part by oversized and potentially unsustainable private sector spending on AI.

Source: reuters.com