Europe's Stellar Growth Stops as Inflation Spikes

Rapid economic growth in Europe is already buckling under the weight of record inflation and the growing likelihood of a Shutdown of Russian energy.

Second-quarter output in the 19-member euro zone more than tripled than analysts had expected, with Italy, Spain and France somewhat above estimates.

Parts of the eurozone are already shrinking

But Friday's data also highlighted concerns: there have been contractions for Portugal and the Baltic region, while Germany, the Continent's No. 1 economy, has unexpectedly stagnated and may be heading for recession. Consumer prices in the euro area have reached a new all-time high.

Figures earlier this week showed a drop in confidence indicators and a second consecutive quarter of an economic downturn in the United States. Expecting weaker growth, traders cut rates on raising interest rates by the European Central Bank.

"At the moment, the momentum created by Europe's reopening and significant fiscal support outweighs the downward flow from the energy crisis. July inflation also beat expectations, but Russia's full impact on Europe's gas supplies has yet to be felt. Add to that tighter financial conditions, and a sharp slowdown looks imminent."

--Jamie Rush, Chief European Economist. For full details of REACT click here

Europe's prospects for the coming months are extremely uncertain. While the summer tourist season gives southern countries a boost, forecasts beyond that are downgraded as the Kremlin's energy threats, protracted fluctuations in supply, and a cost-of-living crisis reduce demand and production.

Far from Europe's economic engine, as in the recent past, the International Monetary Fund said this week that Germany will lag behind this year among the Group of Seven countries due to its over-industrial sector's reliance on Russian natural gas.