FRANKFURT, Germany – (AP) – Europe emerged from a double-dip recession in the second quarter with stronger-than-expected 2.0% growth from the quarter ahead of consumers, according to official figures released on Friday Relaxing pandemic restrictions started spending money on accumulated savings and large businesses showed stronger results.
But the economies in the 19 countries that use the common currency, the euro, still lagged behind pre-pandemic levels and lagged behind the faster recoveries in the US and China as the highly transmissible variant of the Delta virus cast a shadow over the Threw uncertainty about the upswing.
The April-June quarter growth numbers, released by the European Union’s statistics agency Eurostat, compared with a 0.3% decline in the first quarter of 2021 when euro area countries went through a double recession after recovering in mid-2020 . The growth in the second quarter was stronger than the 1.5% forecast by market analysts.
Much of the improvement came from southern European countries that had previously been badly hit by major COVID-19 outbreaks and a loss of tourism revenue.
Italy, which suffered 128,000 pandemic deaths and a deep recession, was a big positive surprise last quarter, growing 2.7% as consumer spending picked up. Portugal boomed with 4.9% growth. Meanwhile, growth in Germany, the largest economy in the EU, returned with a production increase of 1.5% after a sharp decline of 2.1% in the first quarter.
Above all, German car companies, despite a shortage of semiconductor components, achieved high profits in the course of the recovery of the global automotive markets, especially in the higher-priced vehicles from Mercedes-Benz and the luxury brands Audi and Porsche from Volkswagen.
As a further sign of a recovery in activity, the European aircraft manufacturer Airbus this week raised its outlook for deliveries this year.
In the long run, however, the recovery in the euro zone is lagging behind that in the US, where the economy outperformed pre-pandemic levels in the second quarter of 2021, with growth of 1.6% quarter over quarter.
Friday’s numbers leave the euro zone 3% smaller than before the virus outbreak, according to Capital Economics. China, which was first hit by the coronavirus outbreak, was the only major global economy that continued to grow in the 2020 pandemic year.
The stronger performance in southern Europe could be due to households increasing their spending when restrictions are relaxed, said Andrew Kenningham, chief economist for Europe at Capital Economics.
Spain exemplifies the recovery with growth of 2.8% and consumer spending of 6.6% and underscores how far it still has to go. There, the gross domestic product remains 6.8% below the value before the pandemic.
A slow introduction of vaccinations slowed the European economy in the first few months of the year. But Europe has made steady strides since then, overtaking the US in total population-adjusted vaccination in recent days.
Nevertheless, the spread of the highly contagious Delta variant has led to predictions that it could slow down Europe’s economic recovery, but not let it derail. Travel and tourism are recovering, but will remain subdued.
“Given its reliance on tourism, the Spanish economy seems particularly vulnerable to the Delta variant, which is forcing several regions of the country to new restrictions while foreign governments discourage travel to the Iberian Peninsula,” said Edoardo Campanella, economist at UniCredit Bank in Milan .
Other figures released on Friday showed that unemployment in the euro area stood at 7.7% in June, up from 8.0% in May. Inflation rose from 1.9% in June to 2.2% in July.
The eurozone economy was propped up by heavy government spending on pandemic aid, including subsidies to companies that keep workers on leave on their payroll.
The European Central Bank is adding monetary support by keeping interest rate benchmarks at record lows and buying government and corporate bonds worth $ 1.85 trillion ($ 2.2 trillion) to flow to businesses and governments through at least March 2022.
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