EU GDP in the second quarter increased by 13% compared to the same period last year

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The European Union’s GDP grew by 13.2% compared to the same period last year, and by 1.9% compared to the previous quarter, according to a preliminary estimate released on Friday by the statistical office of the ‘EU. The 19 EU countries that use the euro posted even stronger growth of 13.7% and 2% respectively, significantly beating Reuters forecast of 1.5%.

Unlike the United States, which posted annualized growth of 6.5% in the second quarter on Thursday, European GDP has yet to regain its pre-pandemic level, although economists at the Berenberg bank predicted that she could reach this milestone before the end of the year.
Annual inflation in eurozone economies has also increased and could reach 2.2% in July, according to official EU statistics. This is more than the 2% target of the European Central Bank.

The acceleration in price increases was driven by higher costs for energy (+ 14% in July), food, alcohol and tobacco (+ 1.6%) and services.

“The reopening of non-essential stores has seen retail sales return to pre-pandemic levels, as there are signs that companies’ investment plans are increasing, which bodes well for continued growth. “said Tej Parikh, director of Fitch Ratings. economy. “The economic dynamic of the reopening is built on [the third quarter], but an increase in cases of the Delta variant in the euro area may present a downside risk. “

What happens after

The more recent economic data for Europe continues to look promising.

The IHS Markit Purchasing Managers Index released last week showed that trade activity in countries that use the euro has grown at the fastest pace in 21 years this month. Activity in the service sector exploded as residents took advantage of the easing of restrictions, while supply chain issues weighed on manufacturing output.

This momentum was already apparent in the second quarter, when Germany’s export-dependent GDP growth was weaker than expected, while tourist destinations in Italy, Spain and Portugal performed better than expected.

“The euro area is seeing a summer growth spurt with the easing of virus control restrictions in July,” said Chris Williamson, chief economist at IHS Markit. “The service sector in particular is benefiting from the freedom of the relaxed containment measures of Covid-19 and the improvement in vaccination rates, particularly with regard to hospitality, travel and tourism.”

But the spread of the Delta variant of the coronavirus in the region remains a concern, especially for its tourism-dependent economies.

“So far, the available indicators show very little impact on economic activity [from the spread of the variant], but the sentiment data is starting to show signs of heightened concern about the health situation, ”Oxford Economics wrote in a research note.

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