The pressure that the interest rate hike puts on families, companies and states prevented the eurozone economy from recovering in the second quarter. However, the activity took place under increasingly complicated conditions. The harshness of the European Central Bank (ECB) in the monetary policy recipe it applies against inflation has led the region into crisis only grow by a meager 0.1% between April and June compared to the previous quarter, only a tenth more than at the beginning of the year and below estimates. During the same period, the European Union economy as a whole stagnated and stopped growing, having grown by just 0.2% by March.
The euro area’s weakness is clear when compared to the performance of the world’s largest economy, the United States, which grew by 0.5% quarterly through June. This month its central bank, the Federal Reserve, decided to take a break before further increasing the price of money to see what impact their policies had on economic activity. The company led by Jerome Powell reacted more quickly to the escalation of inflation and began changing its “roadmap” (tightening monetary policy) long before the ECB.
Data published this Thursday by Eurostat, the Community’s statistical office, confirms that the Eurozone’s GDP increased by 0.5% compared to the same period in 2022 (in the case of the twenty-seven, by 0.4%). The economic atony was caused by a Stagnation in private consumer spending compared to the previous quarter (+0.0%) and a decline in exports 0.7% given the economic slowdown by giants like China.
At the same time, consumer spending by public administrations rose by 0.2% and productive investment by only 0.3%. By country, Lithuania (+2.9%) recorded the highest quarter-on-quarter increase in GDP across the European Union, followed by Slovenia (+1.4%) and Greece (+1.3%). On the opposite side were Poland (-2.2%), which was affected by inflation and the decline in the value of its currency, as well as Sweden (-0.8%) and Austria (-0.7%).
During the same period, the Spanish economy grew by 0.4%, according to quarterly national accounts published by Statistics. “Although the near-term data appears relatively favorable, we believe a recession is a very real possibility for the U.S. and European economies in the coming months,” said Stefan Hofrichter, head of economics and global strategy at management firm Allianz Global Investors.
Employment is slowing compared to the first quarter
Eurotat also published employment data, with the rate increasing by 0.2% in the euro area and by 0.1% in the 27 countries in the second quarter. In both cases there is also one Slowdown in job creation compared to the beginning of the year, when employment had increased by 0.5% and 0.4% respectively. The largest increase in the number of employees was recorded by the most dynamic economy of the period, Lithuania, where this reference value increased by 1.3%, along with Malta and Portugal. Meanwhile, the most significant declines were recorded in Estonia (-1.5%), Romania (-0.8%) and Croatia (-0.7%), while in the case of Spain the employment rate remained the same.
At the end of the period there were a total of 216.3 million employed people in the European Union 168.5 million were in the eurozone. From April to June, productivity, measured as the number of hours worked, fell by 0.9% in the co-currency countries and by 0.6% in the Union.