Eurozone economy resilient in face of record inflation

Europe's economy is proving surprisingly resilient against soaring energy and food prices, data showed Friday, as tourism boosted France and Spain but export powerhouse Germany stalled, keeping recession fears alive.

The EU agency Eurostat said gross domestic product in the 19-country eurozone grew by 0.7 per cent in the second quarter, far stronger than expected by analysts. The EU as whole grew by 0.6 per cent.

The war in Ukraine has seen the price of natural gas and grocery items skyrocket, and Eurostat's data also showed that inflation in the single-currency area hit yet another new record of 8.9 per cent in July.

Europe's industrial powerhouse Germany continued to be the worst affected by the war, which added to the country's woes from the continued Covid restrictions in China, a crucial export market.

Stagnant German growth in the second quarter has led analysts across the board to predict a recession that would spill over to the continent as a whole.

Russia has sharply reduced its gas flows to Germany, raising the fear that reserves will be very low this winter and force some level of rationing that would be devastating for the economy.

The International Monetary Fund has warned that Germany, which serves as the engine of the wider European economy, is the most at risk against the war in Ukraine.

Countries reliant on tourism showed better-than-expected resilience, with growth in France and Spain gaining strength as tourists took advantage of unrestricted travel to the world's top destinations.