The European economy just got a lot better

Written by Erika Blanco, CNN The eurozone economy grew 2.2% in the second quarter compared to the previous three months, according to the European Commission (EC). Economists had predicted a 2.3% growth. That marked…

The European economy just got a lot better

Written by Erika Blanco, CNN

The eurozone economy grew 2.2% in the second quarter compared to the previous three months, according to the European Commission (EC). Economists had predicted a 2.3% growth.

That marked the strongest quarterly rise in gross domestic product (GDP) since the third quarter of 2014.

The recovery is supported by solid business and consumer confidence and record-low unemployment, the EC added.

And the good news is not confined to Europe. Throughout the world, economic momentum is strong, supported by rising growth and robust corporate profits. Growth in the first half of 2017 rose at the fastest pace in almost two years, the World Bank reported last week.

“So far, in 2017, economic conditions remain broadly stable,” ECB president Mario Draghi said during his regular monthly press conference on Wednesday.

“Sluggish underlying inflation”

Despite the recent momentum, ECB policymakers believe “sluggish underlying inflation” remains an important problem for the eurozone. The central bank has been trying to convince the public to spend and invest more, a key driver for economic growth, but has been receiving resistance.

The latest consumer price index came in at 2.1% in August, the highest level since September 2004. Inflation also ticked up further during the second quarter, coming in at 2.3%.

In Germany, inflation surged to 2.7% in August. In the currency bloc as a whole, inflation was just 0.8% during the month, despite the economic uptick.

The positive outlook contrasts with the repeated warnings from ECB officials about the underlying problems that may restrain growth in the coming years.

“We need to be careful about coming to conclusions that assume there will be a large fiscal capacity to plug the gaps,” Draghi said, adding that the remaining demand gaps in the eurozone may not be fully taken up.

“There will also be a need for stronger structural reforms,” Draghi said.

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