07:30 AM EDT, 07/31/2024 (MT Newswires) -- Eurozone gross domestic product (GDP) surprised to the upside in Q2, with the economy growing 0.3% versus 0.2% consensus, said ABN Amro.

Ahead of the aggregate release, upside surprises in France and Spain were offset by a surprise contraction in Germany, wrote the bank in a note to clients. Growth in Italy was in line with expectations at 0.2% q/q.

Net exports were a major contributor to strength in France and Spain, but big picture, the data shows a continued divergence between the core and periphery, stated ABN Amro. Southern European countries continue to benefit from record tourist numbers and recovery fund investment flows, while Germany is suffering from persistent weakness in industry.

Meanwhile, the surprise in the aggregate figure relative to expectations can be entirely explained by a 1.2% q/q jump in Irish GDP (which tends to be "highly volatile"); subtracting the impact of this, eurozone growth would have been 0.2%, pointed out the bank.

All told, ABN Amro thinks the headline for Q2 growth overstates the strength of the eurozone recovery. While services activity continues to benefit from rising real incomes and strong tourist inflows, industry remains in the doldrums, hampered by weak global demand for goods, and continued high interest rates.

The bank expects the economy to continue growing at modest, below-trend rates in the near term. Growth should remain at around 0.3% in Q3, with a one-off boost likely coming from the Paris Olympics and other major cultural events, but this will be short-lived, with payback likely in Q4 -- when ABN Amro expects growth to pull back to 0.2%.

ABN Amro doesn't forecast a more "meaningful" pickup in momentum until 2025 when the impact of European Central Bank (ECB) rate cuts is likely to be most felt.