The recession doesn’t seem to be (yet) affecting Europe. If the United States is technical – its economy has contracted for two consecutive quarters – on the other side of the Atlantic, the economic activity of the countries of the euro zone seems to be restrained, despite an uncertain context marked of a strong inflation, a consequence of the war in Ukraine. The Eurostat institute announced on Friday that economic growth in the euro zone was better than expected in the second quarter, at 0.7% compared to the previous quarter, or +4% compared to the second quarter of last year. . This was better than in the United States in April-June, where the economy contracted.
If the war in Ukraine continues to raise prices in the 19 countries that share a currency, it has not stopped the economy. After 0.5% GDP growth from January to March, economists expect a marked slowdown. But the activity was driven by the good performance of tourist services thanks to the lifting of restrictions linked to the coronavirus pandemic. However, the future remains uncertain. Inflation in the Eurozone was boosted to a new high by the war in Ukraine and Western sanctions against Moscow, to 8.9% in July, from 8.6% in June. This indicator has reached a new high every month since November. In addition to rising energy prices (fuel, gas, electricity), European households are increasingly facing rising food prices.
Within the European bloc, the situation is mixed. Growth was stronger in Spain (1.1%), Italy (1%) and France (0.5%). On the other hand, Germany, the largest economy in Europe, decreased (0%). In terms of inflation, the lowest was recorded in France (6.8%) and Malta (6.5%) in July. The Baltic countries have the highest rate: 22.7% in Estonia, 21% in Latvia, 20.8% in Lithuania.
The German economy stagnated
Germany has one of the poorest performances in the euro zone. German growth remained flat in the second quarter, weighed down by accelerating inflation after the war in Ukraine, weighing on purchasing power and industrial activity, according to preliminary figures published on Friday. After growing by 0.8% in the first three months of the year, Europe’s leading economy struggled to “ a difficult global economic context, with the Covid-19 pandemic, disrupted supply chains, rising prices and the war in Ukraine “Explained by the Federal Statistical Institute Destatis in a press release, which nevertheless revised the growth for the first quarter significantly upwards, initially announced at 0.2%. So much so that this extraordinary large increase adjust “ making it difficult to assess growth in 2022 “.
The war in Ukraine ended the strong economic rebound that began a year ago, after the historic recession caused by the pandemic in 2020. The inflation of energy prices it caused has severely punished the powerful industry. in German. This adds to the impact of Beijing’s policy against Covid-19, which has led to prisons and factory closures in China, Germany’s largest trading partner. Export companies, pillars of the German model, were particularly affected, especially the automotive sector which was deprived of important components.
Berlin has counted since the spring of a 2.2% increase in GDP this year, against 1.9% according to the June forecast of the Federal Bank (Bundesbank). However, the energy risk is still flying, and the cessation of Russian gas deliveries to Europe will reduce the value of German GDP by 1.5% in 2022 and 2.7% in 2023.
France, Spain, Italy will resist
France returned to growth in the second quarter, from April to June: its GDP increased by 0.5%, after a decrease of 0.2% in the first quarter. This first estimate of gross domestic product (GDP) in the second quarter, published on Friday by INSEE, should be confirmed at the end of August. For now, even though the clouds of recession seem to have cleared, rising prices continue to weigh on consumption. The consumer price index, in which INSEE published a first estimate for the month of July on Friday morning, crossed the 6% mark (+6.1% in a year after +5.8% in June) .
On the other side of the Pyrenees, Spain’s economy is performing better. Growth rebounded sharply to 1.1%, after peaking at 0.2% in the first quarter, according to official estimates from Spain’s National Statistics Institute (INE). However, this positive index is accompanied by an increase in inflation, at 10.8% in July of a year. This increase in growth is explained in particular by the fact that Spain, hit by the Covid-19 crisis in 2020, has fallen behind in recent months vis-à-vis its neighbors, who, for in most of them the pandemic is over. – related losses. However, the Spanish government expects activity to slow down in the coming months.
Italy also did well. Thanks to the particular recovery of tourism, the country saw a gross domestic product (GDP) increase of 1% in the second quarter compared to the previous one, according to a first estimate published on Friday by the National Institute of Statistics (Istat ). In an economic context covered by rising prices, Italy’s growth thus accelerated significantly compared to the first quarter, which saw an increase in GDP limited to 0.1%. This increase in GDP in the second quarter is higher than expected by the Bank of Italy, which in mid-July predicted growth of around 0.5%, ” despite rising energy costs “. For 2022, the Bank of Italy has raised its growth forecast in mid-July, now expecting a GDP increase of 3.2%, against 2.6% before.
Declining growth in Portugal and Austria
Portugal’s gross domestic product (GDP) fell by 0.2% in the second quarter of 2022, compared to an increase of 2.5% in the first three months of the year. This reduction can be explained in particular by less pronounced growth in private consumption and investment “Explained by the National Institute of Statistics (Ine), which published a first estimate on Friday. Annually, the Portuguese GDP increased in the second quarter by 6.9%, compared to an increase of 11.8% in the first three months of the year.
Austria is not immune to the gloomy global context and marks the time, posting growth of 0.5% in the spring, according to a first estimate published on Friday, compared to an increase of 1.5% this winter. ” Positive momentum is running out of steam at all levels “, commented the reference institute Wifo in a press release. Industry and construction increased by 0.7% and 0.1%, far from the performance of the first quarter. On the demand side, household consumption fell by 1.9%. On the other hand, the foreign trade resisted, with exports rising 2.7%. Ditto for business investment (+1.2%).
Outside the euro zone, in our Swiss neighbors, the economic outlook is also darkening according to the KOF barometer, a short-term indicator for the Alpine country’s gross domestic product (GDP), which fell for the third month. row, indicates the Friday of the institute that calculates it every month. After a moderate decrease in June, the fall of this barometer accelerated in July, its drop amounted to 5.1 points, which fell to 90.1 points, indicates the economic research center of the Federal Polytechnic School in Zurich in a statement. So it fell below the growth threshold of 100 points. ” The Swiss economy should grow sharply in the fall “, predict the researchers of the Zurich institute, evoking “ dark clouds in the conjunctural sky “.