According to a first Eurostat estimate, real GDP in the Eurozone increased by 1.0%QoQ in Q2 2010, from 0.2% in Q1. This is the strongest growth rate since Q1 2008. No components are available yet, but exports, investments and a catching up of the construction sector after a harsh winter should have been the main growth drivers.
Turning to the available country data, the recovery has gained traction in almost all Eurozone countries. Only Greece still experienced a sharp growth decline with a drop of 1.5% QoQ. All other countries have left recession, with Spain (0.2% QoQ) and Portugal (0.2% QoQ) still lagging behind. Core Eurozone countries were the best growth performers in the second quarter, led by Germany (2.2%), the Netherlands (0.9%), Austria (0.9%), Belgium (0.7%) and France (0.6%).
Today’s numbers are a clear sign that the Eurozone has coped with the sovereign debt crisis better than expected. Of course, the Eurozone growth story is still pretty much a German export story. Although several other core Eurozone countries also showed promising developments, it is too early to become overly enthusiastic. In particular, the Southern Eurozone countries are not yet out of the woods. Fiscal consolidation and structural reforms will first weigh on growth before they can become growth-supporting.
After three difficult months of Eurozone battering, today’s numbers will help to heal the Eurozone’s wounds. For the first time since Q2 2009, the Eurozone outpaced the US economy. However, one should not get carried away by emerging decoupling dreams. The last 40 years have shown that Eurozone decoupling from the US economy has always been an illusion. At best, only the Eurozone’s current main attraction, the German economy, has the potential to start a period of growth outperformance.