Italy and Spain have helped drive the eurozone out of recession after a stronger than expected 2% expansion in the second quarter of 2021, official data has shown.
The 19-nation single currency area beat forecasts of a 1.5% increase in gross domestic product despite a disappointing performance from the bloc’s powerhouse economy, Germany.
Figures from the EU’s statistical agency, Eurostat, showed the eurozone growing at an annual rate of 13.7% in the April to June period, with this year’s bounceback in activity a stark difference from the slump in output caused by Covid lockdowns in the same period of 2020.
Growth in the second quarter of 2021 followed declines of 0.6% in the final three months of 2020 and a further 0.3% drop in the first quarter of this year, as the eurozone was hit by fresh waves of the pandemic.
Germany was expected to post 2% growth in the second quarter after a decline of 2.1% in the first three months of the year but managed only a 1.5% expansion after its strong manufacturing sector was affected by disruptions to supply chains caused by a shortage of computer chips.
However, Italy and Spain – the third and fourth biggest economies in the single currency area – grew faster than City economists anticipated. Spain bounced back from a 0.4% decline in first-quarter output to record growth of 2.8% in the three months to June, while Italy’s 2.7% expansion was double the 1.3% pencilled in by analysts.
Of the eurozone’s four biggest economies, France had the weakest growth in the second quarter after a flat performance in the first three months of the year, with 0.9% growth between April and June.
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Eurostat also said that higher energy prices caused eurozone inflation to rise from 1.9% in June to 2.2% in July – the highest annual rate since October 2018 and slightly above the European Central Bank’s 2% target rate.
Andrew Kenningham, the chief Europe economist at the consultancy Capital Economics, said: “We expect another strong number for eurozone GDP in the third quarter, perhaps a little over 2% quarter on quarter, which would bring the economy close to, but below, its pre-pandemic level.”
Figures published on Thursday show the US economy returned to its pre-pandemic level, despite growing at a weaker rate than expected in the second quarter. China became the first big economy to recover from the pandemic-induced global recession last autumn. The UK, having suffered one of the worst downturns in the advanced world, is also not expected to recover until at least later this year.