Eurozone Q2 GDP Final Estimate Will Disappoint With More Challenges Ahead

On Thursday at 10.00 UK Time, the European statistics office (Eurostat) will release the final estimate of Eurozone Q2 GDP. Bloomberg consensus expects GDP to remain unchanged compared to second estimate of +0.3%. However, regional surveys suggest a downward surprise is very likely. In addition, latest data pointed to a deterioration of economic activity in both July and August while monetary developments highlighted recession risks.

Regional Surveys Suggest Eurozone Q2 GDP Final Estimate Will Disappoint

Several countries in the Eurozone already revised downward their estimates for Q2 GDP including Ireland and Italy.

According to the Central Statistics Office, Irish GDP grew by 0.5% QoQ in Q2 (compared to the previsous estimate of 3.3%).

Source: CSO

Over the same period, according to Istat, the seasonally and calendar adjusted, chained volume measure of Italian GDP decreased by 0.4% QoQ in Q2 (compared to the previous estimate of -0.3%).

Source: Istat

More Challenges Ahead

Several indicators show Eurozone economic activity was under pressure in Q3 with Eurozone PMI composite contracting for a third straight month in August and reaching a 33-month low. It’s interesting to note that the final estimate was adjusted lower, signaling more weakness at the of the month.

Furthermore, latest German statistics were particularly worrying with real retail sales falling sharply and factory orders crashing in July.

In this context, both IW and IfW-Kiel revised downward their estimates for German 2023 GDP to -0.5%.

Meanwhile, Eurozone monetary developments showed that lending to businesses and households weakened in July. In a context where the ECB looks on track to tighten further its monetary policy (at least through the balance sheet contraction) and the full effects of previous moves are yet to be realized in the broader economy, the economic outlook is likely to deteriorate further in the coming months, raising risks of a recession.