Usually a nice chart gives a lot of information. This succession of 9 charts is targeted to give you a very simple but persuasive view on the economic dynamics in the Euro Area.
GDP growth numbers have been stronger than expected for a bunch of countries and for the Euro Area as a whole.
This simultaneity means that the reduction in uncertainty is an important source, an important contribution for this improvement. There are a lot of new institutions that were put in place during the last year. They have dramatically reduced the risk of a Euro burst. So the economic horizon for households and for companies is no more limited by this systemic uncertainty that was perceived a year ago. Nevertheless, this does not mean that we are at the eve of a strong and durable recovery. Companies’ investment is still too low to witness a long-lasting recovery. That’s the point to look at in the next couple of quarters. During this period governments have to adopt a more business friendly attitude in order to let the economy improves by itself. It’s not time to change again the global framework if the target is to reduce uncertainty to favor investment and then employment. We don’t need more austerity that can be interpreted as negative shock on the economy. Targeted budget balances have to be conditioned by growth, not the contrary.
The very positive point for the Euro Area outlook can be seen in companies’ surveys. Since May (see here) we can see stronger surveys with inventory adjustments and higher export orders. This means that trade between the Euro Area countries is on the upside. In the past business cycle (80’s and 90’s) these changes were usually at the start of a long recovery. That’s what we have to look at very carefully in the coming months to evaluate the probability of a sustainable recovery.
On the first chart we see that GDP is still lower than before the crisis for the Euro Area as a whole. Only three countries (Germany, Austria and Belgium) have a GDP above the first half of 2008 level. France is just converging to this level in Q2. But for the Netherlands, Italy, Spain, Portugal, Ireland, Finland and Greece the gap is still too wide to imagine a rapid improvement in welfare for citizens of these countries.
This first chart is a simple measure of the depth of the crisis in the Euro Area. In order to make a simple comparison, the Euro Area is still -2.8% below the pre-crisis level (first half of 2008). The United Kingdom is still -2.9% below this level, Japan is -0.1% below and the USA are 4.8% above this pre-crisis level.
On Chart 2 we see that the Euro Area rebound comes after a long period of contraction (6 quarters). Looking at the chart we cannot be convinced that there is a strong change in trend. That’s why it’s important to do everything to ease the recovery.
The same comment can be done for France (Chart 4). Quarterly GDP growth was on average at 0% from the second quarter of 2011 and the first quarter of 2013. Then +0.5% (2% at annual rate) growth is welcomed but it is not yet a structural change.
In Germany (Chat 3), GDP is converging to its former crisis trend. But the momentum of this later is just 1.3%. Can we expect that Germany will be the catalyst for the Euro Area growth?
Even if Italian and Spanish growth numbers were higher than expected we see on charts 5 and 6 that there is still a recession momentum and that the gap with the pre-crisis trend is dramatically wide. Cooperation within the Euro Area will be needed to improve their situation.
Rebound in Portugal (Chart 7) but the GDP level is so low
In Belgium (Chart 8) there is no impulse on economic activity. No break on the upside or and the downside.
The Netherlands (Chart 9) is still in a deep recession, partly due to their real estate crisis and partly due to the austerity policy that was put in place by the government.
Chart 1 – Euro Area – Comparison with the pre-crisis GDP level
Chart 2 – Euro Area – GDP Profile
First Quarter Growth = -0.27% (-1.1% annual rate)
Second Quarter Growth = 0.27 % (1.1% annual rate)
Yea on Year growth = -0.7%
Carry over growth for 2013 at the end of the second quarter = -0.6%
Chart 3 – Germany – GDP Profile
First Quarter Growth = 0%
Second Quarter Growth = 0.7 % (2.9% annual rate)
Yea on Year growth = 0.46%
Carry over growth for 2013 at the end of the second quarter = 0.3%
Chart 4 – France – GDP Profile
First Quarter Growth = -0.16% (-0.6% annual rate)
Second Quarter Growth = 0.5 % (1.9% annual rate)
Yea on Year growth = 0.3%
Carry over growth for 2013 at the end of the second quarter = 0.1%
Chart 5 – Italy – GDP Profile
First Quarter Growth = -0.6% (-2.2% annual rate)
Second Quarter Growth = -0.24% (-1% annual rate)
Yea on Year growth = -2%
Carry over growth for 2013 at the end of the second quarter = -1.7%
Chart 6 – Spain – GDP Profile
First Quarter Growth = -0.5% (-2.1% annual rate)
Second Quarter Growth = 0.1 % (-0.35% annual rate)
Yea on Year growth = -1.7%
Carry over growth for 2013 at the end of the second quarter = -1.45%
Chart 7 – Portugal – GDP Profile
First Quarter Growth = -0.35% (-1.4% annual rate)
Second Quarter Growth = 1.05% (4.3% annual rate)
Yea on Year growth = -2%
Carry over growth for 2013 at the end of the second quarter = -1.6%
Chart 8 – Belgium – GDP Profile
First Quarter Growth = -0.% (-0.13% annual rate)
Second Quarter Growth = 0.1 % (0.4% annual rate)
Yea on Year growth = -0.1%
Carry over growth for 2013 at the end of the second quarter = -0.2%
Chart 9 – The Netherlands – GDP Profile
First Quarter Growth = -0.4% (-1.5% annual rate)
Second Quarter Growth = -0.2 % (-0.7% annual rate)
Yea on Year growth = -2%
Carry over growth for 2013 at the end of the second quarter = -1.3%
