Eurozone growth accelerates despite stagnation in Germany – business live | Business

Just in: the eurozone economy expanded by 0.7% in the second quarter of the year, much stronger than the 0.2% which economists expected.

Growth across the euro area accelerated from the 0.5% growth recorded in Q1 (revised down from +0.6%), despite the economic shock from the Ukraine war.

Although Germany stagnated, a stronger performance from Spain, Italy and France helped to spur growth. Tourism and the reopening of businesses after pandemic lockdowns last winter helped.

Eurostat adds:

Among the Member States for which data are available for the second quarter 2022, Sweden (+1.4%) recorded the highest increase compared to the previous quarter, followed by Spain (+1.1%) and Italy (+1.0%).

Declines were recorded in Latvia (-1.4%), in Lithuania (-0.4%) and in Portugal (-0.2%). The year on year growth rates were positive for all countries.

UK consumer credit growth has accelerated at the fastest rate in three years, as households struggle to cope as inflation hits a 40-year high.

People borrowed an additional £1.8bn in consumer credit in June, up from a £900m increase in May, the latest Bank of England statistics show.

Around £1bn extra went onto credit cards, with another £800m on car dealership finance, personal loans, and other consumer credit.

The annual growth rate for all consumer credit increased to 6.5% in June; the highest rate since May 2019, while credit card borrowing surged 12.5%, the highest rates since November 2005.

Economist Shaun Richards explains it’s a sign that the cost of living is hitting households:

Tomer Aboody, director of property lender MT Finance, says:

Going forward, one would expect higher inflation and living costs to mean many will have to dip into savings in order to manage, with those who don’t have that buffer finding life increasingly difficult.’

The BoE also reports that approvals for house purchases, an indicator of future borrowing, fell to 63,700 in June, from 65,700 in May, below the 12-month pre-pandemic average.

On an optimistic note, at least Germany avoided a contraction in the second quarter of the year.

But with high energy and commodity prices continue undermining purchasing power and profit margins, a technical recession in the second half looks like a done deal, writes Carsten Brzeski of ING:

The just released flash estimate of 2Q German GDP shows that the economy stagnated, from a significantly upwardly revised 0.8% quarter-on-quarter in the first quarter. On the year, the economy grew by 1.5%. GDP components will only be released at the end of August but according to available monthly data up to May and the statistical agency’s press release, public and private consumption supported economic activity, while construction and trade were a drag.

Supportive factors for the economy such as post-lockdown reopenings and filled order books have been losing momentum rapidly. Weaker global demand, supply chain frictions, and high inflation denting consumption are hitting the German economy. In fact, consumer confidence is already in clear recession territory and it looks as if the rest of the economy is quickly following suit.

The economy avoided contraction but the only positive element of today’s data is probably the upward revision of first quarter growth.

Newflash: Germany’s economy failed to grow in the last quarter, as Europe’s largest economy was hit by soaring prices, a trade slowdown, and supply chain disruption following the Ukraine war.

German GDP was unchanged in Q2 compared to Q1, a little worse than expected, and just 1.5% higher than a year ago.

Statistics body Destatis says weak trade hit growth.

The economy was mainly supported by private and government consumer spending, while the trade balance dampened economic growth.

The difficult global economic conditions with the ongoing corona pandemic, disrupted supply chains, rising prices and the war in Ukraine are clearly reflected in economic development.

But….Germany’s growth in the first quarter has been revised to +0.8%, compared with 0.2% previously, so it started 2022 stronger than we thought.

In the City, shares in NatWest have soared 8% after the bank announced a special dividend for shareholders and raised its full-year guidance.

That payment means the UK government is in line for £1bn thanks to from its near-50% stake in the group, which also reports a dip in second quarter profits and “uncertainty” over the UK’s economic outlook.

NatWest revealed on Friday it was poised to issue dividends worth 20.3p a share, after reporting “strong growth” in lending and deposits across the business, thanks in part to rising interest rates that meant it could charge borrowers more for loans and mortgages.

Nearly half of the dividends – about £1bn – will be handed to the Treasury, which still owns 48% of the bank’s shares after its £46bn state bailout at the height of the 2008 banking crisis. More here.

Austria’s economy continued to grow in the last quarter too.

Austrian GDP increased 0.5% in April-June, as it continued to recover from last winter’s national lockdown when it was battling a severe outbreak of Covid-19.

Next up… Spain.

And the Spanish economy has expanded by a faster-than-expected 1.1% in the second quarter of the year.

That’s up from 0.2% in the previous three months, and much faster than the 0.4% which economists expected.