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European Economy Grows 2% 07/30 06:26
FRANKFURT, Germany (AP) -- Europe emerged from a double-dip recession in the
second quarter with stronger than expected growth of 2.0% over the quarter
before, according to official figures released Friday, as southern European
economies previously hard hit by the pandemic showed surprisingly strong
results.
But the economy in the 19 countries that use the euro currency still lagged
pre-pandemic levels and trailed the faster recoveries in the U.S. and China,
with the delta variant continuing to cast a shadow of uncertainty over the
upturn.
The growth figure for the April-June quarter announced Thursday by the
European Union's statistics agency Eurostat compared to a drop of 0.3% in the
first quarter as the 19 countries that use the euro endured a double-dip
recession after a rebound in mid-2020. The second-quarter growth figure was
stronger than the 1.5% foreseen by market analysts.
Italy, which saw 128,000 pandemic deaths and a deep recession, was a major
positive surprise, growing 2.7% as consumer spending revived. Portugal boomed
with 4.9%. Meanwhile growth returned in major economies France, which grew 0.9%
compared to the previous quarter, and Germany, which saw growth of 1.5% after a
sharp drop of 2.1% in the first quarter. German auto companies in particular
have shown strong profits despite a shortage of semiconductor components as
global auto markets recover, particularly for the higher-priced vehicles sold
by Mercedes-Benz and by Volkswagen's Audi and Porsche luxury brands.
Yet the recovery lags the one in the U.S., where the economy surpassed its
pre-pandemic level during the quarter. Friday's figures leave the eurozone 3%
smaller than before the virus outbreak, according to Capital Economics. China
was the only major economy to continue growing during pandemic year 2020.
The stronger performance in southern Europe may be the result of stronger
spending by households as restrictions are eased, said Andrew Kenningham, chief
Europe economist at Capital Economics. Spain, with growth of 2.8% and consumer
spending up 6.6%, both illustrated the rebound and underlined how far it has to
go. Gross domestic product remains 6.8% below where it was before the pandemic.
Lagging vaccinations held back the European economy in the first part of the
year but have made steady progress since. Yet the spread of the more-contagious
delta variant has led to predictions that it may slow, though not derail, the
economic upturn. Travel and tourism, key for places like Spain and Greece, are
recovering but remain subdued.
"Given its reliance on tourism, the Spanish economy looks especially
vulnerable to the delta variant that is forcing several regions in the country
to impose new restrictions, while foreign governments are discouraging trips to
the Iberian Peninsula," said Edoardo Campanella, economist at UniCredit Bank in
Milan.
Officials figures Friday also showed eurozone unemployment at 7.7% in June,
down from 8.0% in May. Inflation rose to 2.2% in July from 1.9% in June.
The eurozone economy has been sustained by government spending on pandemic
relief including subsidies for companies that keep furloughed workers on the
payroll. The European Central Bank is adding monetary support by keeping
interest rate benchmarks at record lows and by purchasing 1.85 trillion euros
($2.2 trillion) in government and corporate bonds through at least March 2022.
That step drives down longer-term borrowing rates and helps keep credit flowing
to businesses and governments.
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