San Francisco Frontiers - Eurozone economy grows despite Middle East war

The EU's statistics agency said the 21-country eurozone grew by 0.4 percent in the second quarter.

The figure is higher than the 0.2 percent predicted by economists for Bloomberg, and 0.1 percent by analysts for financial platform FactSet.

Eurostat said the single currency area recorded zero growth in the first three months of 2026, a welcome second revision from the 0.2 percent contraction according to revised data published in June.

That figure raised the spectre of a technical recession -- when there are two consecutive quarters of economic contraction.

Thursday's data demonstrated the European economy was weathering the impact of the US-Iran war that began earlier this year better than feared.

"The continued steady growth of the eurozone economy... shows that households and businesses have not pared back their spending much due to the Iran war," Andrew Kenningham, chief Europe economist for Capital Economics, said.

"We think the economy will continue growing steadily in the second half of the year," he said in a note, adding: "All told, the data published today suggest that the economy is weathering the Iran war quite well."

The eurozone economy was buoyed by Ireland, which recorded growth of 3.9 percent in the second quarter of the year, a significant increase from the 7.0 percent contraction registered in the first three months of the year.

The large swings are not tied to underlying economic activity but are purely the result of accounting operations by multinationals -- including major pharmaceutical companies and tech giants -- that have chosen the country as their European base to benefit from its low corporate tax rates.

Capital Economics said that itestimated the eurozone economy recorded growth of 0.25 percent if Ireland was excluded.

The consultancy did point to GDP growth in the largest European economies -- Germany, France and Italy.

But in Europe's biggest economy, Germany, growth slowed to 0.2 percent in the second quarter after its economy expanded by 0.4 percent in the first quarter.

The European Central Bank last month cut its eurozone growth projection for this year to 0.8 percent from 0.9 percent.

S.Hall--SFF