Economic growth in the Eurozone: initial country data for second quarter meets high expectations

The reporting season on economic growth in the Eurozone for the second quarter is off to a good start! Data from France, Spain and Austria met expectations, with these positive figures resting on broad shoulders. Both domestic demand and foreign trade show promising signs.

Despite once being labelled the “problem child”, France is the second-largest economy in the Eurozone and is enjoying respectable economic growth once more. At +0.5%, growth in spring remained stable at the previous quarter’s level, which means it should almost reach the EMU average level. This quarter, the lion’s share was attributable to foreign trade. The export sector achieved strong growth compared with the first three months of the year, whereas imports only showed a slight increase. Nevertheless, the positive quarterly figures and the current markedly favourable economic climate should not lead us to underestimate the numerous economic and fiscal hurdles facing the new French President, Emmanuel Macron. The labour market and the tax system are particularly in need of reform. Attempts to reduce the high level of public debt have not made much progress in recent years either.

At +0.9% up on the previous quarter, the Spanish economy was able to improve its performance yet again. At the time of the flash estimate, no particulars were available regarding GDP demand components. However, according to a report by the Spanish central bank, domestic demand contributed significantly to the strong quarterly result. Foreign trade also showed positive signs. This means that, as previously, the sustained tourism boom must have had a beneficial effect on the net export balance. The Iberian Peninsula will surely have seen increased crowds, especially around the time of the Easter holidays.

At a strong 0.9%, Austria reported yet another increase in quarterly growth. Austrian statistics are also lacking additional data on the second quarter’s sub-indicators. Among other things, the positive economic development will have experienced a lasting benefit from the dynamic trend in foreign trade, the improved employment situation and last year’s income tax reform which provided relief. The latter actually worsened the new public debt ratio somewhat, but this might be offset in part by the good economic growth performance expected this year.

More country data on economic growth in the second quarter should follow over the next few weeks. Data for the Eurozone as a whole is scheduled for 1 August. The initial forecast for GDP in Germany will then follow on 15 August.

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