Euro Area: Third estimate confirms GDP rebounded in Q2 amid easing lockdowns
According to a third estimate, the Euro area economy expanded a seasonally-adjusted 2.2% from the previous quarter in Q2, which followed Q1’s 0.3% drop and improved on the 2.0% increase reported in preliminary releases. Compared with the same quarter of the previous year, seasonally-adjusted GDP jumped 14.3% in Q2, marking a sharp turnaround from Q1’s 1.2% drop and coming in above the preliminary estimate of a 13.6% rise.
The quarterly bounce-back came as Covid-19-related containment measures were loosened throughout the single-currency union, supporting business activity and household spending. Private consumption soared 3.7% over the previous quarter in Q2 (Q1: -2.1% s.a. qoq) amid improved consumer sentiment and labor market dynamics. Moreover, fixed investment expanded 1.1% (Q1: -0.2% s.a. qoq), while public consumption rebounded (Q2: +1.2% s.a. qoq; Q1: -0.5% s.a. qoq). That said, restocking subtracted 0.2 percentage points from growth, as companies faced higher demand and protracted supply disruptions.
Meanwhile, the contribution from the external balance was neutral as exports increased 2.2% (Q1: +0.7% s.a. qoq), and imports also accelerated (Q2: +2.3% s.a. qoq; Q1: +0.4% s.a. qoq).
In terms of specific countries, the sharpest expansion among major players was recorded in Spain (Q2: +2.8% s.a. qoq), followed by Italy (Q2: +2.7% s.a. qoq), Germany (Q2: +1.6% s.a. qoq) and France (Q2: +1.1% s.a. qoq).
Looking ahead, economists at Berenberg stated:
“The winter ahead will provide the real test for our assumptions that vaccines will continue to work and that the US and Europe will not need to resort to new restrictions to contain the spread of Covid-19. Alongside the normal seasonal rise in respiratory infections, which often strain medical systems during peak flu season, we need to watch the risk that more Covid-19 infections could still overwhelm medical capacities. But if the advanced world can make it through winter without this risk materialising, it will likely unleash a further wave of pent-up demand across economies and markets which should support growth above potential rates even after economies have recovered from the pandemic.”