Euro-Area economic growth picks up pace

European Central Bank (ECB) President Mario Draghi is seen after a news conference at the ECB headquarters in Frankfurt, Germany.
European Central Bank (ECB) President Mario Draghi is seen after a news conference at the ECB headquarters in Frankfurt, Germany.PHOTO: REUTERS

FRANKFURT (BLOOMBERG) - The euro-area economy gathered pace in the second quarter as more nations joined the recovery.

The 0.6 per cent expansion matched an Aug. 1 estimate and was supported by continued growth in Germany, the region's largest economy, and the strongest Spanish performance in almost two years.

But after years of unprecedented stimulus, the upswing is finally starting to spread across the 19-nation region.  Exports and investment have led France to its strongest continuous expansion since 2011 and the Netherlands posted the fastest growth since the end of 2007. Italy, which has lagged the pickup of its peers, is starting to shake off its reputation as the sick man of Europe with an increase in gross domestic product that may top 1 per cent this year for the first time since 2010.

Even though the euro-area recovery comes with steadily declining unemployment and business confidence at a decade high, price pressures have so far remained largely elusive. The European Central Bank is confident that inflation will eventually pick up as wages rise and economic slack abates, and President Mario Draghi has had to upgrade his view of the economy in recent months.

"It's all about inflation now," Florian Hense, European economist at Berenberg Bank in London, said before the report. "Draghi is sounding slightly more confident that core inflation will indeed respond to the resilient recovery, but so far it hasn't translated into stronger price dynamics."

The 69-year-old Italian will have an opportunity to share his assessment in an Aug. 23 speech in Germany, before heading to the Federal Reserve's annual symposium in Wyoming.

Investors will scrutinize his comments for any clues on the future path of stimulus. Before breaking for the summer, policy makers signaled that they're getting closer to phase out quantitative easing, currently scheduled to run at a pace of 60 billion euros (S$95.5 billion) a month through December.  The Governing Council holds its next policy meeting on Sept. 7.