Although in general its GDP for the second quarter Eurozone reported unexpected growth (0.7% qoq compared to the Reuters consensus forecast of 0.2%), the outlook remains bleak. Between two crossfires, on the one hand, the worsening situation with energy supplies, and on the other hand, the tightening of borrowing conditions around the world, we continue to predict that the eurozone will slide into recession in the second half of this year. After two years of tourism turmoil linked to the coronavirus pandemic, in 2022 tourists were eager to return to their favorite places. Growth in tourism services in France contributed to GDP growth of 0.5% qoq in the second quarter, beating our estimate of 0.2% and more than offsetting a 0.2% decline in the first quarter. GDP in both Spain (1.1% qoq in the second quarter, after 0.2% in the first quarter) and Italy (1.0% after 0.1%) accelerated significantly. Spain, while lagging behind the rest of the eurozone in its recovery from the coronavirus-led recession, is benefiting from solid growth in domestic consumption and investment. The picture looks less rosy in Europe’s colder north, which is more dependent on industrial production and Russian gas imports. German real GDP was flat at 0.0% qoq in the second quarter, down from an upwardly revised 0.8% in the first quarter.
Reflecting still robust underlying demand, private consumption appears to have held up well in the second quarter. This is despite a severe shock to real incomes due to high inflation – mainly due to rising import costs – and the fact that nominal incomes rose only marginally (unlike in the US and UK). An increase in government spending likely also contributed to growth in the second quarter.
However, the Eurozone is facing a difficult winter. Even with the mobilization of E.E. To cut natural gas consumption to boost storage ahead of winter, Moscow’s decision to drastically cut supplies highlights the serious risk of power shortages during the cold months, which could force factories to shut down production so people can heat their homes. .
* Economists of Berenberg Bank.
Source: Kathimerini
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