Economists expect Eurozone economy to continue to expand over the rest of the year despite the spread of the Delta variant
As per the latest figures released by Eurostat, a Directorate-General of the European Commission, the Eurozone Economy has bounced back from its Coronavirus (COVID-19) led downturn by reporting more than 2% of growth for the April-June 2021 quarter.
Compared to the same period a year earlier, when lockdowns to slow the spread of the COVID-19 brought economic activity close to a standstill, the GDP jumped 13.7%.
The quarter-on-quarter rise in Eurozone GDP was higher than the 1.5% expected by economists. The results also show a strong rebound from the bloc’s 0.3% contraction in the first quarter. The figures show that Eurozone is on a path of recovery. The easing of COVID-19 led restrictions have improved business and consumer confidence. The roll-out of vaccination programmes has also helped in re-opening of retails shops.
France, Italy and Spain reported quarter-on-quarter expansions in output. French economy reported 0.9% growth, a rise of 1.1% from the expectations. The improvement in household spending helped France avoid reporting a lesser growth. Italy reported 2.7% growth, outstripping economists’ expectations of 1.3%. The major factors responsible for the rise of GDP were recoveries in services activity and household spending. Surpassing the expectation of 2.2%, Spain reported a growth of 2.8%, a sharp rebound from its first-quarter decline of 0.4%. The performance was fuelled by a 6.6% rise in Spanish household consumption, which offset lower investment.
Speaking on the occasion, a fellow at the Bruegel think-tank in Brussels and at the Peterson Institute for International Economics – Jean Pisani-Ferry said, “Vaccination rates are significant already and they are increasing steadily. Some renewed restrictions are likely, but I do not think governments will go for lockdowns as long as there is no risk for the hospital system to be overwhelmed.”
Germany reported 1.5% growth as against the expectation of 2%. Supply constraints, which left manufacturers short of materials such as semiconductors, were the main factors for holding back Germany’s growth. The challenges of supply chain also led to increase in prices of manufactured goods, causing inflation faster than most economists had expected to 2.2% in July 2021.
This is above European Central Bank’s recently raised inflation target of 2%. However, the core inflation, stripping out more volatile energy, food, tobacco and alcohol price, fell from 0.9 to 0.7%. The Eurozone labour market, which survived the pandemic because of Government furlough schemes, had its biggest improvement for more than a year as jobless numbers fell by 423,000 to 12.5 million in June 2021. Also, the unemployment rate fell from 8% to 7%.
The economists expect the Eurozone economy to continue to expand rapidly over the rest of the year despite the spread of the highly infectious Delta variant. Eurozone also surpassed United States (U.S.) and China in terms of growth as they reported only 1.6% and 1.3% growth respectively, for the same period. China topped its pre-pandemic output level last year and the U.S. did the same in the latest quarter.
