William Malcolm

Eurozone GDP Rebounds 2% In 2nd Quarter

The European Union’s economy returned to growth in the second quarter. It thus emerged from the double recession caused by the covid-19 pandemic. Eurostat announced today in its first flash estimate that the EU’s gross domestic product (GDP) increased by 1.9 percent compared to the previous three months. Germany, Italy, and France showed rapid growth, and the Czech economy returned to growth, although in its case growth lagged significantly behind expectations.

The EU economy contracted 0.1 percent in the first quarter after declining by 0.4 percent in the last three months of last year. After a strong recovery in the third quarter of last year, the EU economy has returned to recession, which is usually defined as at least two-quarters of an economic downturn.

The GDP of the euro area alone rose by two percent in the second quarter after falling by 0.3 percent in the first three months of the year. Year-on-year, GDP grew by 13.2 percent in the EU and by 13.7 percent in the euro area.

The development of the euro area economy thus exceeded analysts’ expectations. According to a Reuters survey, GDP assumed that GDP would increase by 1.5 percent compared to the first quarter and by 13.2 percent year on year. Economic activity is favorably affected by the gradual easing of measures in place against the spread of coronavirus.

However, the economic outlook remains uncertain, according to analysts, as the number of cases of coronavirus infection has increased in many countries in recent weeks due to a more contagious delta mutation. “We still expect the third quarter to be even better. However, risks are looming,” said Pantheon Macro’s chief European economist Claus Vistesen. “New cases of the virus are on the rise and data from Britain suggest that this is hampering economic activity,” he added.

Today’s Eurostat estimates are based on incomplete data and will be updated later by the Authority. In today’s report, Eurostat published data from 11 EU member states. The strongest quarter-on-quarter economic growth from these countries was recorded in Portugal, where GDP grew by 4.9 percent. On the other hand, Lithuania did the worst, with GDP growing by 0.4 percent. The Czech Republic followed with a growth of 0.6 percent, which was preceded by a decline of 0.3 percent in the first quarter. However, analysts in a Reuters poll expected the Czech economy to grow by two percent compared to the previous quarter.

Germany, the largest economy in Europe, reported a GDP growth of 1.5 percent in the second quarter. In France, growth was 0.9 percent, while in Italy it reached 2.7 percent. Spain also performed well, with GDP growing by 2.8 percent.

Eurostat also published today other reports on economic developments in the EU. These, among other things, showed that the unemployment rate in the EU, fell to 7.1 percent in June, compared with 7.3 percent in May. In the euro area alone, the unemployment rate fell by three-tenths of a point to 7.7 percent. But inflation has returned to growth.

This week, the International Monetary Fund (IMF) improved its estimate of this year’s growth in the eurozone economy to 4.6 percent from the previously expected 4.4 percent. Last year, according to the IMF, the economies of countries using the euro fell by 6.5 percent due to a pandemic.