Was Q2 as good as it gets?

In Q2, the euro-zone probably saw a small improvement on Q1’s 0.2% rise in GDP. But falls in the latest activity indicators such as the PMI and the EC’s ESI suggest that the region’s recovery could be starting to lose some steam. (See Chart.) Admittedly, some peripheral economies are still gathering momentum. But growth in Germany might be topping out – retail sales there are falling again – while France and Italy remain very weak. With inflation at a four-and-a-half year low of 0.5% in June, the ECB may be forced to do yet more to revive the recovery and combat deflationary risks.