The Eurozone's economic growth in Q2 2024 came in lower than previously anticipated, according to Eurostat's latest release. The region’s GDP saw a modest increase of 0.2% compared to the previous quarter, falling short of economists’ expectations of a 0.3% rise. On an annual basis, the growth rate remained at 0.6%, unchanged from earlier estimates. For comparison, the GDP in Q1 had shown a 0.3% quarterly growth and a 0.5% increase year-over-year.

Productivity data paints a worrying picture: labor productivity per hour dropped by 0.2% compared to the same period last year, while productivity per employee saw a sharper decline of 0.3%. The European Central Bank (ECB) is banking on increased productivity to counterbalance rising wage costs, which might otherwise push companies to hike prices even further.

However, beneath the surface of these figures lies a significant issue. Eurozone countries are running considerable deficits in a bid to maintain the illusion of stability and growth, but cracks are emerging and visible. The private sector, especially in the recession-hit manufacturing and construction industries, is already struggling.

All eyes are now on the ECB, which has a duty to monetize the deficits and make credit cheaper again. If this does not succeed, the eurozone will face massive credit deflation.