The data: Q2 GDP was confirmed at 0.4%qoq and 1.5%yoy, as in Q1. The details show that private consumption was up 1.1%qoq (3.3%yoy) and public consumption up 0.8%qoq (+0.5%yoy). Investment (GFCF) was down 1.5%qoq (+3.9%yoy) but stockbuilding rose to €167 mn. On the external front, exports were up 3.7%qoq (7.8%yoy), but imports rose faster at 5.1%qoq (12.3%yoy), due to the rise in domestic demand.
Looking at contributions to quarterly GDP growth, the largest contribution came from exports, +1.6 p.p., followed by private consumption with +0.9 p.p. The contribution from public consumption and stock building were 0.2 p.p. and 0.3 p.p. respectively. Gross fixed capital formation recorded a small negative contribution of 0.2 p.p., and imports a rather large one with -2.2 p.p.
Our comment: Today’s numbers are consistent with a recovery driven by exports and by domestic demand, particularly consumption, that has benefited from the rise in employment and in wages.
- The rise public consumption is mostly driven by wages in the public sector, that have been supported by the partial reversal in salaries’ cuts implemented during the Economic and Financial Adjustment Programme.
- Investment surprised on the downside, but the decline comes after several quarters of rises, which means that the trend in investment remains upwards. Nevertheless, the economy is still under a significant credit constraint that is likely to be lifted only very gradually, unless banks foster a faster rate of deleveraging for non-financial firms. Measures to boost equity finance rather than debt finance are also crucial to boost productive investment in the coming quarters.
- On the external front, exports of goods and services in volume hit a record of €68.6bn in 2014 and they are due to beat another record this year.