Euro area Q2 GDP revised slightly lower, slowdown seen ahead

The euro area's economy expanded at a slightly slower pace than previously estimated over the three months to June, alongside steady growth in employment.

According to Eurostat, gross domestic product within the single-currency bloc expanded at a quarter-on-quarter pace of 0.6% in the second quarter after the 0.5% gain recorded during the first quarter.

The former was one tenth of a percentage point less than the preliminary estimate and consensus forecast.

In comparison to a year ago, GDP was ahead by 3.9% in the second quarter.

Employment meanwhile strengthened by 0.3% on the quarter, after growth of 0.6% over the three months to March, for a year-on-year rate of increase of 2.4%.

Commenting on the latest figures, Oxford Economics senior economist, Ricardo Amaro, said euro area growth dynamics over the first half of 2022 left a "flattering" impression.

But Oxford Economics's forecasts were for growth to nearly stall in the third quarter, register a "modest" drop in the last quarter of the year and to barely not grow at the start of 2023.

Hence, improvement in the jobs market was expected to stall.

For her part, Jessica Hinds at Capital Economics said the euro area was headed towards a recession before the year was out.

She further highlighted the dispersion in rates of growth among member countries.

In the likes of the Netherlands, GDP expanded at a quarter-on-quarter clip of 2.6% on the back of investment, while Spain continued to lag and Germany was also faring relatively poorly.

But she wasn´t anticipating a deep recession either nor did she expect it to result in mass layoffs.

"We expect downturn to be fairly shallow and short-lived, with activity recovering by Q2 next year [...]," she said.

"But there is little scope for further big increases in euro-zone employment in the coming quarters – and the risks to our GDP forecast are increasingly skewed to the downside."