The economy of the countries that use the euro still grew in the second quarter of 2022, but the latest indicators make it inevitable to glimpse economic stagnation already between July and September.
The European statistical agency yesterday updated its first estimate for European GDP between April and May of this year and calculates that it grew by 0.6% , both in the eurozone and in the whole of the Twenty-seven. This represents a slight reduction of one-tenth of the growth of the eurozone, since Eurostat calculated a month ago that the advance would be 0.7%. The European agency will definitively confirm these calculations in September.
At first glance, it may seem that the data is positive since the war in Ukraine that is disrupting post-pandemic growth began in February and Europe manages to maintain growth until at least June. However, the blow will come in the third quarter of the year and some national data published yesterday by Eurostat thus impeding it.
Germany is again the key to it. According to the European statistical agency, the continent’s economic locomotive no longer grew this second quarter compared to the previous quarter. Yes, it did so by 1.5% if the interannual variation is taken into account, but the Germanic country loses steam. Other worrying signs are the figures registered by countries such as Latvia or Lithuania, already in negative territory.
In addition, the second European economy, France, also sees its GDP approaching stagnation, with quarterly growth of 0.5%. In most euro countries, their figures are less than 1%, only Spain with a growth of 1.1% and the Netherlands with 2.6% exceed this threshold.
For this reason, analysts at Oxford Economics point out that despite registering a “solid” expansion in the second quarter, “growth will be much lower in the second half of the year.” Their forecasts predict a ” near stagnation ” in the third quarter and a “modest contraction” in the last.
Rebound after the pandemic
According to ING’s chief economist for the Eurozone, Carsten Brzeski, the Nineteen have still grown in the first half of the year thanks to a rebound effect caused by the end of confinements that has mainly impacted the services sector. This has benefited the countries where this economic sector has more weight and has harmed those that, like Germany, have a strong industrial structure. “The more exposed the economy is to global trade, the weaker its growth has been in the second quarter,” concludes this economist.
And along the same lines as the experts at Oxford Economics, Brzeski predicts that Europe will record negative growth for the next three quarters. ” Consumer confidence is already at rock bottom and business confidence has also started to decline,” he warns.
Of course, this economist recalls that high inflation is weighing down consumption and is beginning to strongly affect the business sector: “Companies can no longer transfer their high costs, which will lead to a reduction in profit margins. In addition, the crisis energy will increasingly weigh on economic activity and low water levels will affect transportation and industrial production.”
Surprise in the first half of the year
Now, this does not exclude the fact that the results of the first two quarters of the year have surprised for good. The experts consulted agree in qualifying the growth as solid and the ING economist recognizes that ” the data for the second quarter have been a surprise “.
A greater negative impact of the war was expected, both because of high energy prices and bottlenecks in production chains or simply because of fear and uncertainty, points out Carsten Brzeski. In fact, according to Eurostat data, in the second quarter of the year the EU still registered 0.3% more employed workers than the first quarter. In year-on-year terms, growth was 2.4% in the eurozone and 2.3% in the EU.
In its latest review of the economic outlook, the European Commission defended the positive impact of the Next Generation recovery funds and the foundations laid in the national reform plans to underpin a strong recovery after the shock caused by the coronavirus. For this reason, Brussels in July insisted on maintaining a growth projection of up to 2.7% in 2022 and 1.5% in 2023 for all European countries.