Let's take stock of the data releases first today. Here are the preliminary Q2 GDP figures, which exemplifies resilience despite mounting inflation pressures and the Russia-Ukraine conflict:
- France Q2 preliminary GDP +0.5% vs +0.2% q/q expected
- Spain Q2 preliminary GDP +1.1% vs +0.4% q/q expected
- Germany Q2 preliminary GDP 0.0% vs +0.1% q/q expected
- Italy Q2 preliminary GDP +1.0% vs +0.3% q/q expected
- Eurozone Q2 preliminary GDP +0.7% vs +0.2% q/q expected
And here are the consumer inflation figures for the month of July:
- France July preliminary CPI +6.1% vs +6.0% y/y expected
- Spain July preliminary CPI +10.8% vs +10.6% y/y expected
- Germany July preliminary CPI +7.5% vs +7.4% y/y expected
- Italy July preliminary CPI +7.9% vs +8.1% y/y expected
- Eurozone July preliminary CPI +8.9% vs +8.6% y/y expected
The overall Eurozone readings tell the story for the most part but it belies underlying sentiment surrounding the euro area economy at this point in time. The Q2 economic figures here could be subject to revisions later on but leading data in the past two weeks have shown that euro area activity has slowed down considerably in July.
As such, this peculiar backdrop of numbers where we are still seeing inflation surging in Europe alongside a rather optimistic set of output figures is not exactly what we had in mind when talking about the dire outlook in the region.
Don't let that fool you though. A recession is still looking ever as likely in Europe with demand conditions deteriorating and consumption activity set to take a major hit with a looming gas crunch set to befall the region in the winter months.
Add in the fact that we are not yet seeing an inflation peak and it just means that we are slowly inching towards a major slowdown and most probably a recession so long as the Russia-Ukraine conflict continues to see Europe caught in the economic crossfire.
