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Euro area GDP in the second quarter of this year grew by 2% qoq, or 13% in annual terms, according to preliminary data from Eurostat (.pdf). In all EU countries, the indicator increased by 1.9% and 13.2%, respectively. In the first quarter, the GDP of the euro area decreased by 0.3% (in the EU – by 0.1%), the year-on-year decline was 1.3%, in the fourth quarter of last year – by 0.7% (minus 4.9% year to year). Last year, it was in the second quarter that the maximum decline in economic activity due to the effect of coronavirus restrictions fell, then the euro area GDP decreased by 12.1% quarter-on-quarter, and by 15% year-on-year.

The sharpest quarterly growth was shown by Portugal (plus 4.9%), Austria (plus 4.3%), Latvia (plus 3.7%), as well as Spain and Italy (growth by 2.8% and 2.7%, respectively ). German GDP expanded 1.5% after contracting 1.8% in the first quarter, while France’s economy emerged from stagnation and recorded an increase of 0.9%. The growth was largely due to the increased activity in the service sector (including tourism) against the background of the lifting of the second wave restrictions imposed last fall and winter. In general, for the year, the growth of the euro area economy may reach 4.6%, the International Monetary Fund predicts (next year – 4.3%).

Also on Friday, Eurostat presented inflation data for July – the annual rate exceeded the official target of the ECB and amounted to 2.2% against 1.9% in June. The acceleration in growth was due to an increase in energy prices (plus 14.1% yoy, 1.8% yoy); excluding them, the growth was 0.9%. Recall that deflation was observed in the euro area last year – against the background of the pandemic, prices fell by 0.3%, but since the beginning of the year, there has been a consistent increase in inflation.

Exceeding the target will not cause any changes in the regulator’s policy – the ECB softened the wording in advance, abandoning the benchmark “close, but not reaching 2%,” replacing it with 2%. Moreover, following the results of the last meeting, the bank announced that it intends to keep rates at the current or lower level until inflation reaches a steady rate of 2%, that is, until it stabilizes at this level in the medium term (judging by the regulator’s own forecast, this will not happen until at least the end of 2023).

Source: Kommersant

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EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.

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