Introduction: France avoids recession with 0.5% growth
Good morning, and welcome to our rolling coverage of business, the global economy and financial markets.
Today we find out how the Eurozone economy fared in the first quarter after the war in Ukraine pushed up energy prices and disrupted supply chains, slowing global growth.
And the breaking news is that France avoided recession by returning to growth in April-June as strong exports helped offset weak domestic demand.
France’s GDP increased 0.5% In Q2, just-released figures show that inflation slowed by 0.2 percent in January-March, hitting the eurozone’s second-largest economy.
This is stronger than expected, and France has avoided two consecutive quarters of falling growth.
French statistical body INSEE GDP in volume rebounded sharply after last quarter’s decline.
Foreign trade picked up growth, exports decreased by 0.8% and imports decreased by 0.6%.
But household consumption spending fell again as French consumers were hit by inflation.
We also get early morning growth figures from the Eurozone, which may indicate a generally weaker quarter of economic activity and higher inflation.
Michael Hewson of CMC Markets He says:
On a broader EU basis, Q2 GDP is expected to decline to 0.2% from 0.6% in Q1. We are lucky to see any expansion in Germany and given the current geopolitical and economic backdrop, this could be good for some time.
We’ve got a quick snapshot of flash CPI inflation for July after numbers from Germany rose to 8.5% in the numbers released yesterday.
And with the US economy shrinking for two consecutive quarters, the outlook for the global economy in the coming months looks uncertain.
It also comes today
UK Bank NatWest The telecom group is reporting the results while staffing. BT They are holding their first national strike in decades.
Energy groups Shell and Centrica have come under fire after announcing profit rises and big payouts to shareholders yesterday.
Overnight, tech giants Apple and Amazon beat Wall Street’s hopes.
- Amazon On Thursday, it reported its second consecutive quarterly loss but beat the company’s revenue expectations and gave a positive forecast for the rest of the year; Shares jumped more than 10% in afternoon trading.
- Apple It reported better-than-expected profits and sales as iPhone demand held firm despite a slowing US economy and rising inflation.
the agenda
- 6:30am BST: French GDP report for Q2
- 8am BST: Spanish GDP report for Q2
- 8am BST: Austria’s GDP report for Q2
- 9am BST: German GDP report for Q2
- 9am BST: Italian GDP report for Q2
- 9.30am BST: UK mortgage approvals and consumer credit report
- 10am BST: Eurozone GDP report for Q2
- 10am BST: Eurozone inflation for July
- 1:30pm BST: US Personal Income and Expenditure Report
Key events
Filters Beta
A union representing pilots of Spain-based low-cost airline EasyJet says its members will go on strike for nine days in August to demand better working conditions. According to Reuters.
The SEPLA union is asking the airline to fix the working conditions of the pilots before the Covid-19 pandemic and give the pilots a new multi-year contract.
A technical recession, incidentally, is two consecutive quarters of negative growth.
But as we saw yesterday, when US GDP fell in Q2, some economists argue that the measure is too clear.
Paul Donovan of UBS He is firmly in this camp, he says to customers.
Yesterday, a group of people with English literature degrees tried to tell people with economics degrees what the economy was doing. A group of economics majors attempted to teach English literature majors the meaning of words. A recurring battle ensued between journalists and economists over what “recession” meant.
Economists don’t consider two-quarters of negative growth a recession.
Countries with declining populations may have negative growth, capacity is not recognized, and the labor market is neglected. The danger in using “failure” to describe the US economy today is that it invites false comparisons to real failures in the past.
The United States may fall in the future, but it is currently in slow motion.
At least one American president has known its meaning before, though…
ING: Germany’s technical failure appears to be a done deal
Optimistically, at least Germany avoided contraction in the second quarter of the year.
But as higher energy and commodity prices eroded purchasing power and profit margins, the technical slowdown in the second half looked like a done deal, he wrote. Karsten Brzeski of ING:
The just-released 2Q German GDP estimate showed the economy stagnated, up sharply from a 0.8% quarter-on-quarter increase in the first quarter. The economy grew by 1.5 percent during the year. GDP units will only be released at the end of August, but according to monthly data through May and a press release from the statistics agency, public and private consumption supported economic activity, while construction and trade were drags.
Supportive factors for the economy, such as post-lockdown reopenings and full order books, are quickly losing momentum. Weak global demand, supply chain disruptions and high inflation in dental consumption are hurting the German economy. In fact, consumer confidence is already in clear recessionary territory and the rest of the economy looks set to quickly follow.
The economy has avoided a contraction, but the only positive part of today’s data is probably an upward revision to first-quarter growth.
Germany’s economy stopped
Newflash: Germany’s economy failed to grow in the last quarter amid rising prices, a trade slowdown and supply chain disruptions following the Ukraine war.
German GDP in Q2 was unchanged from Q1, slightly worse than expected and 1.5% higher than a year ago.
The body of statistics You are ready Weak business growth.
The economy is mainly supported by private and public consumption spending, and the balance of trade has hindered economic growth.
The difficult global economic situation due to the corona epidemic, disrupted supply chains, inflation and the war in Ukraine is clearly reflected in the economic development.
German Econ. Released Stats:
German GDP (Q2)
Actual: 0.0%
Expected: 0.1%
Before: 0.2%
Worse than expected— TraderTalent (@TraderTalent) July 29, 2022
German Econ. Released Stats:
German GDP (YoY) (Q2)
Correct: 1.5%
Expected: 1.8%
Before: 4.0%
Worse than expected— TraderTalent (@TraderTalent) July 29, 2022
But …. Germany’s growth improved to +0.8% in the first quarter, compared to 0.2% previously, so 2022 has started stronger than we expected.
Italy has defied forecasts as it tries to navigate its political crisis amid energy shortages.
Italy’s economy grew 1 percent in April-June, three times faster than expected.
#Italy Gross domestic product came in stronger than expected, with 1 percent growth versus forecasts of 0.3 percent.
France and Spain entered more than expected. Europe is beating expectations by far.
*ITALY PRELIM 2Q GDP increases 1% Q/Q; EST +0.3% via https://t.co/YuQw2Lo9BN @markets
– Alessandro Speciale (@aspeciale) July 29, 2022
Spain’s GDP rose 1.1 percent in the second quarter, while inflation rose to 10.8 percent in July.
The recovery of tourism and consumption will increase the domestic product.
via Bloomberg pic.twitter.com/EuRTUUOcD7
— Daniel LaCelle (@dlacelle_IA) July 29, 2022
Kalina McCortoff
In the City, shares in NatWest rose 8 percent after the bank announced a special dividend to shareholders and lifted its full-year guidance.
That charge means the UK government owns a close to 50% stake in the group, which has been lined up for £1bn, as it reported a drop in second-quarter profits and “uncertainty” over the UK’s economic outlook.
Nat West announced on Friday a dividend of 20.3pa a share after reporting “strong growth” in its loans and deposits business, thanks in part to rising interest rates it can charge borrowers for loans and mortgages.
Almost half of the stake – £1bn – will be transferred to the Treasury, which still owns 48% of the bank’s shares after acquiring £46bn of the estate at the height of the 2008 banking crisis. More here.
France’s encouraging return to growth has not allayed fears of a recession, said Sophie Lund-Yatt, equity analyst at Hargreaves Lansdowne.
“The French economy has shown signs of growth, growing 0.5% in the second quarter, reversing the previous contraction and beating market estimates of 0.2%. Growth is supported by rising exports, but the underlying picture is less positive.”
Household consumption fell during the quarter, likely due to increased financial prudence, while government spending also eased. The overall data set is certainly a relief, but it did little to completely erode recession fears.
In Austria, inflation has also increased.
Consumer prices rose by 9.2% last year (or 9.3% according to EU consensus), the highest in decades.
Statistics Austria Director General Tobias Thomas He says:
“In July 2022, living in Austria has become more expensive: in the first estimate, the inflation rate for July is 9.2 percent.” This is the highest price since March 1975.
Food and fuel prices remain at record highs despite additional price increases for household energy and restaurants.
French inflation hits record high
French inflation rose to 6.8% in July, according to EU consensus, up from June’s peak of 6.5%.
The inflation is “related to the summer season” with the acceleration of service prices, INSEE says, with higher prices for food and manufactured goods.
Austria grew 0.5% in Q2
The Austrian economy continued to grow in the last quarter.
Austria’s gross domestic product rose 0.5% in April-June, continuing to recover from a national lockdown last winter in the wake of the Covid-19 outbreak.
Spain beat forecasts with 1.1 percent growth.
Next… Spain.
And Spain’s economy grew by a better-than-expected 1.1 percent in the second quarter of the year.
That was up from 0.2% in the previous three months, and much faster than the 0.4% economists had expected.
Spanish estimated GDP QOQ actual 1.1% (estimate 0.4%, previous 0.2%). $MACRO
— Breaking Market News ⚡️ (@financialjuice) July 29, 2022
Klaus Visteson, Macroeconomist b Pantheon MacroeconomicsIt says growth in France was “strong” in Q2, but warns that growth from net trade and construction may slow later this year.
Strong French GDP growth in Q2, but all inventories and net trade. Big scope for average reversals in both H2, and I doubt household spending will recover much. The positive trend in service capex remains a real strong point.
— Klaus Vistesen (@ClausVistesen) July 29, 2022
Tourism stands out as another strong point, both to offset the weakness of domestic consumption and through net exports. Good for the Spanish title later.
— Klaus Vistesen (@ClausVistesen) July 29, 2022
