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Eurozone economic indicators

Eurozone Emerges from Recession Thanks to France and Germany

The German and French economies grew respectively by 0.7% and 0.5% in Q2 (faster than the US), pulling the Eurozone out of its longest recession.


Eurozone growth was 0.3% from the previous quarter, with its two biggest economies revealing unexpected strength such as Austria (0.2%) and Finland (0.7%). In the meantime, Portugal was the best performer with 1.1% growth due to higher exports. That compared with around 0.4% growth in the quarter (1.7% annualized)  in the United States.


Regarding France, economy posted its strongest quarterly growth since early 2011 supported by consumer spending, industrial output and inventories, although investment component fell gain. At the opposite, German economy posted  its largest expansion in more than a year thanks largely to domestic private and public consumption ahead of elections (September 22).


On the negative side, the recession is worsening in Netherlands (-0.2% QoQ ; -1.8% YoY) and particularly in Cyprus (-1.4% QoQ ; -5.2% YoY) where the contraction could exceed forecast set by European Commission (-6.7% for 2013) and therefore could challenge the bailout program.


Overall, despite some disappointments, Eurozone is on track to technically recover (two positive quarters) in Q3 2013  as several surveys  (Eurozone PMI, Sentix Investor Confidence) show that conditions have improved since the end of June.


Source: Eurostat

Eurozone Q2 GDP Forecasts: An Update

Since our last update, several indicators which can be used to forecast Eurozone Q2 GDP were published:


1/ Belgian economy, which represents 5% of Eurozone real GDP, grew by 0.1% QoQ in Q2.

2/ Despite French consumer goods spending increased in Q2, it  fell more than expected in June.

3/ German real retail sales also dropped well below expectations in June.
4/ Italian GDP was down 0.2% QoQ in Q2.


As a consequence, we can update our scenarios with a more cautious approach regarding French and German contributions. By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21%; Italy: 18%; Spain: 12% and Belgium: 5%), we can adjust our forecasts:


Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.2% 0.3% 0.4%
France 0.0% 0.1% 0.2%
Italy (1st publication) -0.2% -0.2% -0.2%
Spain (1st publication) -0.1% -0.1% -0.1%
Belgium (1st publication) 0.1% 0.1% 0.1%
Others -0.2% -0.1% 0.0%


Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.054% 0.081% 0.108%
France 0.000% 0.021% 0.042%
Italy (1st publication) -0.036% -0.036% -0.036%
Spain (1st publication) -0.012% -0.012% -0.012%
Belgium (1st publication) 0.005% 0.005% 0.005%
Others -0.034% -0.017% 0.000%
Total -0.023% 0.042% 0.0107%
Total (rounded) 0.0% 0.0% 0.1%

Last data change the final results (rounded) of our central and optimistic scenarios. The central estimate becomes 0.0%. Therefore, France and Germany should post strong numbers in Q2 to expect a technical recovery (two positive quarters) in Q3 which seems to be confirmed by the last July and August surveys (Eurozone PMI, Sentix Investor Confidence),

Eurozone Recovery Could Take Place in Q3 2013

According to the PMIs’ surveys published this morning, Eurozone business activity resumed modest growth in July for the first time since the start of 2012.


More from Reuters:


Euro zone private industry unexpectedly bounced back to growth this month as factories increased output for the first time in well over a year, business surveys suggested on Wednesday.
Markit’s flash Eurozone Composite PMI, based on surveys of thousands of companies across the region and a reliable indicator of growth, jumped to an 18-month high of 50.4 in July from 48.7 in June.
That smashed even the most optimistic forecast in a Reuters poll and is the first month the PMI has been above the 50 mark that divides growth and contraction since January 2012.
“It’s a very encouraging picture, it’s pretty broad-based. Germany is leading the pack followed by France but even the periphery … is seeing a return to growth in manufacturing,” said Chris Williamson, chief economist at data collator Markit.
Williamson said the latest PMI results tentatively pointed to 0.1 percent gross domestic product growth in the 17-nation bloc in the current quarter, in line with a Reuters poll taken earlier this month.


These figures were unveiled while the main central banks of the euro area (Bundesbank, Bank of France and Bank of Spain) upgraded their forecasts concerning Q2 2013. Indeed, on July 22, Bundesbank reported that German economy grew at a stronger pace in Q2 (after 0.1% in Q1) with more moderate growth seen in Q3:


The assessment that the German economy expanded strongly in the second quarter after a weather-related weak start to 2013 is being confirmed by current indicators. Important contributions to growth in the second quarter should come from industry and construction.

On July 23, Bank of Spain estimated that the Spanish economy likely contracted 0.1% in the second quarter from the first.


Spain’s central bank said Tuesday the euro zone’s fourth-largest economy likely contracted 0.1% in the second quarter from the first, the latest sign that Spain may be close to emerging from a recession started in late 2011.

In the first official estimate of quarterly economic performance, the Bank of Spain said gross domestic product likely contracted 1.8% from the second quarter of 2012. In the first quarter this year, the economy had contracted 0.5% on the quarter and 2% on the year.


Finally, on July 8, Bank of France upgraded its forecast for Q2 GDP to 0.2%:


France’s economy is expected to have grown 0.2% in the second quarter, the Bank of France said Monday, as it revised upward its prediction from last month.
In its previous estimate, the French central bank expected French gross domestic product to grow 0.1% from the previous quarter.


As a consequence, by taking into account the weight of each economy in the euro area (Germany: 27%; France: 21% and Spain: 12%), we could simulate Eurozone GDP with more precision:


Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.3% 0.4% 0.5%
France 0.1% 0.2% 0.3%
Spain -0.2% -0.1% 0.0%
Others -0.2% -0.1% 0.0%




Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.081% 0.108% 0.135%
France 0.021% 0.042% 0.063%
Spain -0.024% -0.012% 0.000%
Others -0.080% -0.040% 0.000%
Total -0.002% 0.098% 0.198%
Total (rounded) 0.0% 0.1% 0.2%

In the central scenario, based on the main central banks’ expectations and on the assumption of a less deeper recession in other countries, Eurozone growth could now reach 0.1% in Q2 2013. Therefore, if the momentum stays positive in August and September, Eurozone could technically exit recession in Q3 2013 (two positive quarters), which will be faster than expected.

Tourism Boosted Hiring in Spain

The number of officially jobseekers (not seasonally adjusted) in Spain dropped significantly by 127 248 people or 2.6% to 4.76 million in June, the Labor Ministry said Tuesday. It was the fourth straight month of declining job claimants and the steepest in one month since comparable statistics began in 1997. Spain’s State Secretary for employment said:


“Never has registered unemployment fallen so much in a single month”


Note that corrected for seasonal variations, the number of unemployed people rose by 996 to 4.88 million. Yet, government and financial markets used to focus on the raw figures.


These data bolster government claims that the Spanish growth is finally turning the corner.


More from Businessweek:


Spain’s unemployment dropped in June at the start of the peak tourism season, with the Prime Minister Mariano Rajoy predicting the trend will continue as the worst economic slump in the country’s democratic history comes to an end.
The number of people registering for jobless benefits fell by 127,248 from May to 4.76 million, the Labor Ministry in Madrid said today in an e-mailed statement. That is the sharpest decline on record for a month of June. Economists had predicted a decline of 100,000, according to the median of 5 forecasts in a Bloomberg News survey.
Spain, with an unemployment rate of 27 percent, is home to almost a third of all the people out of work in the euro region.
Economy Minister Luis de Guindos last month said Spain will see a durable improvement in employment as rising exports help haul the euro-area’s fourth-largest economy out of its second recession since 2008 in the three months through September. The Bank of Spain last week said indicators suggest the recession is abating after seven straight quarters of contraction. Exports rose to a record last year, while the country in March posted its first trade surplus since at least 1971.
Still, the nation’s current account swung back into a deficit in April, and households’ wage income fell 8.5 percent in the last quarter from a year earlier after a labor-rules overhaul helped companies to cut payrolls.