• The euro area as a whole continues along a steady if unspectacular growth path. This middling recovery is likely to continue into 2025 as consumer spending becomes a more reliable driver of growth.
• The picture is not uniform with Germany continuing to act as a brake on overall activity. There is little sign of any improving momentum and it looks to be another case of stagnation this year. However, the French economy remains on a recovery path despite heightened political uncertainty and the muted expansion in Italy is likely to continue.
• The narrative of UK outperformance remains after another strong quarter. We do expect slightly slower growth rates ahead but continue to be relatively upbeat about the UK economy’s prospects next year.

 

Click 'Download PDF' above to see full report.

Taking stock of our European growth outlook

With Q2 GDP estimates now available we take stock of the growth situation in Europe. The flash numbers were more or less in line with our H2 outlook (see here) but the euro area economy expanded slightly more than expected with 0.3% Q/Q growth again. That represents a fairly solid start to the year after a period of flat growth in H2 2023. Our forecast for 0.7% annual average growth, which we’ve held since December (see here), still looks appropriate at an aggregate level, but that masks differences between euro area countries. Most notable is Germany where a small contraction and weak survey data puts the economy on course for another year of stagnation.

More details on the national outlook for Germany, as well as France and Italy, can be found in the full document (see link to PDF above). We also set out our view on the UK economy which we believe is likely to continue its recent trend of outperformance even if recent high growth rates prove unsustainable, as we expect.

 

Chart 1: A mixed picture in Q2

Chart 2:The UK and peripheral euro area economies continue to outperform

MUFG European Macro Outlook: GDP & CPI