Eurozone economy approaching pre-pandemic levels

Growth in the area registered robust growth in the third quarter, a performance that brings the member countries of the single currency closer to pre-pandemic levels, despite problems related to the shortage of some materials and the prices of energy.

The Gross Domestic Product (GDP) of the euro zone grew 2.2% between July and September compared to the previous quarter, in which it had registered a net rebound of 2.1%, according to a first estimate of Eurostat posted on Friday.

The bloc of 19 countries that share the single currency had resumed strong growth between April and June, thanks to progress in vaccination against COVID-19 and the progressive lifting of sanitary restrictions.

The euro zone suffered a recession in the last quarter of 2020 and in the first quarter of 2021, with GDP declining 0.4% and 0.3%, respectively, due to the health crisis.

“The solid rise of the GDP of the euro zone in the third quarter means that the recovery phase is almost over in most countries“Of the single currency, commented in a note Andrew Kenningham, chief economist for Capital Economics.

GDP is now only 0.53% lower than that of the fourth quarter of 2019, that is, just before the pandemic and the recession that followed it broke out, he stressed. Eric Dor, Director of Economic Studies of ESEG School of Management.

The strong rebound in the April-June period lasted during the summer, thanks to the progressive lifting of sanitary restrictions that had slowed activity, particularly in transport, hotels and tourism.

Good winds in France

For the EU as a whole, GDP grew 2.1% in the third quarter, consolidating its rise (2%) from the previous quarter, the European statistical office also indicated.

Among the large countries, Germany registers one of the worst results (1.8%), after Spain (2%) and Italy (2.6%), while France sees its growth clearly accelerated (3%, after 1.3% in the second trimester).

France has almost returned to its PBI before the pandemic. On the other hand, Germany and Italy, whose recovery phase “is widely finished”, states Kenningham, are still far from that, with GDP 1.2% and 1.4% lower respectively than before COVID-19.

The situation is even worse in Spain, whose PBI It is 6% lower than before 2020, due to the country’s great dependence on tourism, a sector highly affected by the pandemic.

In general, the improvement in growth continues to affect employment and the unemployment rate in the euro zone continued its decline in August, reaching 7.5% of the workforce, after 7.8% in June and 7.6% in July. The figure for September will be revealed next week by Eurostat.

This rather positive outlook is clouded over: the annual inflation rate in the euro zone continues to rise. In October it rose to 4.1% in one year, the highest rate in more than 13 years, due to the sharp rise in energy prices.

The energy sector experienced the largest increase in October (23.5% in one year), following a 17.6% rise in prices in September, according to Eurostat.

Inflation has not stopped rising in the euro area since June, and it was 3% in August and 3.4% in September.

These price pressures make financial markets fear a rise in interest rates.

But both the European Central Bank and the International Monetary Fund (IMF) and many experts still consider “temporal”The rise in prices.