Define irony: in a quarter in which Greece was supposed to have been near death (at least according to the worst PMI print in history and of course, judging by the bank lines in front of the capital controlled institutions), yesterday we learned that Greek GDP surged relative to expectations rising by 0.8%, which was what analysts had expected but with a minus sign in front of it.
Then overnight, we got the rest of European GDP, including the big three: Germany, France and Italy. The results were nothing short of a big disappointment.
To wit: Germany Q2 GDP rose by 0.4%, below the 0.5% expected; Italy's GDP rose by 0.2%, also below the 0.3% expected, but the biggest surprise was France, which did not even rise, and Q2 GDP was unchanged, well below the 0.2% expected, and down substantially from the revised 0.7% GDP growth in Q1.
At the Euroarea level, the result was also a big negative surprise with Q3 GDP rising 0.3%, down from 0.4%, and below expectations. This was the worst GDP print since Q3 2014.
Seasonally adjusted GDP rose by 0.3% in the euro area1 (EA19) and by 0.4% in the EU281 during the second quarter of 2015, compared with the previous quarter, according to flash estimates2 published by Eurostat, the statistical office of the European Union. In the first quarter of 2015, GDP grew by 0.4% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.2% in the euro area and by 1.6% in the EU28 in the second quarter of 2015, after +1.0% and +1.5% respectively in the previous quarter. During the second quarter of 2015, GDP in the United States increased by 0.6% compared with the previous quarter (after +0.2% in the first quarter of 2015). Compared with the same quarter of the previous year, GDP grew by 2.3% (after +2.9% in the previous quarter).
And the full breakdown:
From the WSJ:
The data also highlight the big divergences within the 19 countries sharing the euro, which threaten the region’s prospects for a sustained recovery.
Accelerating GDP growth in Germany was offset by weaker growth in Italy and the Netherlands, while the French economy stagnated.
German GDP growth quickened to 0.4% from 0.3% in the first quarter, falling short of economists’ forecasts of a 0.5% gain. That translates into an annualized rate of 1.8%, according to the country’s statistical agency, Destatis.
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French Finance Minister Michel Sapin, commenting on the weak data, said the country’s economy can still grow enough by the end of the year to start bringing down unemployment and reach the official 1% 2015 GDP target, as the government previously forecast. To achieve that, Mr. Sapin said the government will stick to its policy of tax cuts for businesses, which has proved controversial with the left of the ruling Socialist party.
“We must stay the course,” Mr. Sapin said.
And if Europe strays the course, and GDP goes negative again for the triple or quadruple dip recession, we no longer keep track, then the ECB will have just the dry powder to boost Q€ even more. Which after China's devaluation, will be just what the ECB will need to do.
As for the surprising Greek GDP boost, take it as a one-time gift for becoming Germany's latest Mediterranean colony.