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Aug 14th 2015, 11:35 by P.W. | LONDON
TODAY S figures for GDP in the second quarter of 2015 from Eurostat are
disappointing. The consensus among economists was that the 19-strong currency
club would grow by 0.4%, the same as in the first quarter. Instead the pace of
quarterly growth slowed a little, to 0.3%, leaving output 1.2% higher than a
year ago.
The French outcome was the main setback. Output had been expected to rise by
0.2% following growth of 0.7% (revised up from 0.6%) in the first quarter.
Instead it stagnated mainly because of an abrupt slowdown in consumer spending.
Italian GDP continued to expand but by 0.2% compared with 0.3% in the first
quarter, leaving output only 0.5% higher than a year ago.
The feeble economic performance of France and Italy is the principal reason why
the overall recovery of the euro area since the spring of 2013 has been a
pallid affair. Given the stimulus from lower energy prices and the policy of
quantitative easing (purchasing assets by creating money) pursued by the
European Central Bank (ECB) since March, the renewed weakness in the euro zone
s second- and third-biggest economies is troubling.
Their unsatisfactory performance contrasts with the strong upswing in the
Spanish economy, the fourth-biggest in the euro area. The pace of quarterly
growth strengthened from an already robust 0.9% in the first quarter to 1.0% in
the second quarter, among the highest in the euro area. The reasons why Spain
is now doing so well are disputed. Some point to the benefits of structural
reforms made in the past three years (which Italy and France have lagged in
introducing) while others emphasise the wrenching internal adjustments made by
workers and businesses together with the cathartic effect of sorting out the
banks in 2012.
An oddity is that despite the intense liquidity squeeze of the past few months
in Greece, where the banks have been unable to lend and the government stopped
paying commercial creditors, GDP is estimated to have grown by 0.8% in the
spring. Statisticians have also revised up their estimates for previous
quarters, from minus 0.4% to minus 0.2% in the final three months of 2014, and
from minus 0.2% to zero in the first quarter of 2015.
One reason for the strong outcome in the second quarter might be that Greeks
fearing for what might happen to their euros in the event of a Grexit and the
reinstatement of the drachma (which would immediately tumble in value) spent
some of the cash they withdrew from bank accounts on consumer durables such as
cars, regarding these as safer forms of wealth. Whatever the precise cause (and
the estimate may in any case be revised down), the outlook for the Greek
economy remains bleak owing to the trauma of late June and July when the banks
were closed for three weeks and capital controls were introduced.
As so often before, a solid performance by Germany, the hub economy within the
euro area, has bolstered euro-zone growth. German output expanded by 0.4%, a
bit higher than in the first quarter when it grew by 0.3%, though lower than
the consensus forecast of 0.5%. Although the pace of growth was still
satisfactory a worry is that exporters are bound to be hurt by the weakening
Chinese economy, a prime market for German investment goods and luxury cars.
A year ago, the first estimate for GDP in the second quarter was a wake-up call
for the ECB because it showed a stalled economy only a year after a feeble
recovery had begun. Subsequent revisions have turned that ominous zero into
growth of 0.1% as well as raising GDP growth at the start of the recovery, in
the second quarter of 2013, and in the final quarter of 2014, from 0.3% to
0.4%. The estimates published today are only the first draft of economic
history and may also be revised up. But the broader picture is that the
euro-zone recovery, while intact, lacks vigour to a worrying extent.