Eurozone lifts from recession
The gross domestic product of the 17-nation eurozone grew by 0.3 per cent in the April-June period from the previous three months, when the economy contracted by 0.3 per cent, according to a report from Eurostat, the statistical agency of the European Union. That was slightly better than the 0.2 per cent growth that economists had been expecting.
On an annualised basis, the eurozone grew by about 1.2 per cent in the second quarter, short of the 1.7 per cent second-quarter showing by the US and 2.5 per cent in Australia, but nonetheless a relief for Europe, which has weathered an unemployment rate that has risen to 12.1 per cent and a sovereign debt crisis that raised existential questions about the euro currency.
"It's not the end of the problems," said Ralph Solveen, an economist at Commerzbank in Frankfurt. "But the technical recession is over."
The economy as a whole of the European Union, which consists of 28 nations, also grew by 0.3 per cent in the second quarter.
Germany grew by 0.7 per cent, after stagnating in the first quarter. The gains were led by demand from households and government, the Federal Statistical Office reported from Wiesbaden.
France, which had declined for the two previous quarters, posted 0.5 per cent quarterly growth, as household spending grew and companies increased exports of goods and services, although investment declined slightly.
Portugal, racked by austerity-induced recession and the recipient of a bailout from the troika of the European Commission, European Central Bank and International Monetary Fund, was the biggest surprise in the data. The economy there expanded by a robust 1.1 per cent in the quarter.
Spain's economy shrank by just 0.1 per cent, improving from a 0.5 per cent decline in the first quarter. The economy of Cyprus shrank 1.7 per cent, the worst showing of any EU member.
Mr Solveen said external demand had helped the so-called periphery of the eurozone - Portugal, Spain, Italy and Ireland - that were among the hardest hit by the sovereign debt crisis and the hangover from the boom years.
Frequently Asked Questions about this Article…
Breaking out of recession means the 17-nation eurozone ended a six-quarter downturn as GDP grew 0.3% in April–June versus the prior three months, according to Eurostat. In plain terms, the technical contraction has stopped, though the article notes that important problems remain.
Eurozone GDP grew 0.3% quarter-on-quarter in Q2 and about 1.2% on an annualised basis. That annualised pace was below the US (about 1.7% for the second quarter) and Australia (about 2.5%), but still a welcome improvement for Europe.
Germany led with 0.7% quarterly growth driven by household and government demand, France grew 0.5% as household spending and exports rose, and Portugal surprised with a robust 1.1% expansion. Spain improved to a -0.1% contraction from -0.5%, while Cyprus was the weakest at -1.7%.
Although GDP returned to growth, unemployment in the eurozone remains high at about 12.1%, and sovereign debt pressures that have previously raised existential questions about the euro have not disappeared. Economists quoted in the article stress the technical recession is over but that significant problems persist.
The quarterly growth figures come from Eurostat, the statistical agency of the European Union. The German numbers were reported by the Federal Statistical Office in Wiesbaden, and commentary in the article included an economist from Commerzbank.
According to the article and a Commerzbank economist, external demand helped the so-called periphery (Portugal, Spain, Italy and Ireland) — countries that were hardest hit by the sovereign debt crisis — to improve their performance.
Portugal’s 1.1% expansion was surprising because the country had been in an austerity-induced recession and was the recipient of a bailout from the troika — the European Commission, the European Central Bank and the International Monetary Fund. The recovery signalled unexpectedly strong momentum despite prior bailout measures.
Not necessarily. The article notes that the technical recession is over, but cautions remain: unemployment is still high, sovereign debt issues persist, and growth was uneven across countries. Everyday investors should view the Q2 improvement as a positive but partial step rather than a complete recovery.
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