Q2 resilience unlikely to last, but inflation to stay high

National data released so far suggest that euro-zone GDP rose in Q2, but with activity surveys very weak in July and the full effect of monetary tightening still to be felt, we continue to expect GDP to contract in the second half of 2023. Otherwise, national figures suggest that euro-zone inflation fell to 5.3% in July and support our view that the ECB will probably hike rates once more in this cycle. Next week, we expect to learn that euro-zone Q2 GDP increased by 0.4% q/q (or 0.2% excluding Ireland) while euro-zone retail sales edged up in June and the unemployment rate held steady at a record low.

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