2Q Growth Negative in Euroland

August 14, 2008

Real GDP among countries using the euro fell 0.2% not annualized last quarter.  Such was the first contraction since at least 1995 for this Bloc and reduced on-year growth to 1.5% from 2.1% in 1Q08 and 2.7% in 3Q07 when the global economic problems began.  Quarterly growth was in the red for Germany (-0.5%), France and Italy (each -0.3), and it was unchanged in the Netherlands.  Positive rates of quarterly growth were registered in Greece (0.6%), Austria and Portugal (0.4% each), Belgium (0.3) and even Spain (0.1%).  Not all members have reported figures for this preliminary estimate.

German GDP contracted at a 2.0% seasonally adjusted annualized rate last quarter but rose 1.5% saar in 1H08, not far below the 2H07 pace of 1.9%.  Consumption, investment, and imports each declined, but net foreign demand was a positive force.  The Bundesbank put a positive spin on today’s figures, blaming higher energy prices and asserting that “major pessimism” is unwarranted.  French growth was negative for the first quarter since 4Q02, and that country experienced much flatter expansion in 1H08 as a whole than did Germany.  Consumption’s rebound of just 0.1% after a 0.1% dip in 1Q was particularly worrisome, and a 0.5 percentage point drag from net exports underscores the fragility of French competitiveness.

The table below documents the decline in year-over-year growth over the three quarters between 3Q07 and 2Q08 among selected Ezone members.

Y-O-Y Growth 3Q07 2Q08
Euroland 2.7% 1.5%
Germany 2.4% 1.7%
France 2.4% 1.1%
Italy 1.6% 0.0%
Spain 3.8% 1.8%
The Netherlands 4.0% 2.8%
Belgium 2.8% 2.0%
Portugal 1.6% 0.9%
Greece 3.9% 3.4%
Austria 3.0% 2.3%



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