Counting the 27 European Union countries, Eurostat said economic output rose 1.9 percent last quarter.
Europe’s revival has helped stoke a mild return of inflation, which rose to 2.2 percent in July following a 1.9 percent rate the previous month. The European Central Bank, which until recently sought to keep inflation below or close to 2 percent, has a new strategy that will tolerate inflation above its target if the price increases are considered transitory.
Keeping economies open is seen as crucial to sustaining Europe’s rebound. Since countries ended lockdowns earlier this year, order books for industrial goods have filled rapidly — so much that some European manufacturers have begun to express worry about keeping up with demand. And unemployment continued to fall, declining to 7.7 percent in euro area in July from 8 percent in June, Eurostat reported.
“Never before has sentiment been so positive among eurozone businesses and consumers,” Bert Colijn, senior eurozone economist at ING Bank, said in a note to clients. “This indicates that the economic rebound is in full swing.”
Since the pandemic arrived in early 2020, Europe’s economy has been rocked by two recessions — a double-dip recession. In the second quarter of 2020 alone, eurozone economic output shrank 12.1 percent.
But in a reflection of the return of economic fervor, many of Europe’s biggest companies reported bumper earnings this week, from a surge in aircraft delivery at Airbus, the world’s largest plane maker, to a consumer splurge in the purchases of expensive scarves and handbags at the luxury retailer Hermes. But the Delta variant, which has caused a jump in coronavirus infections across Europe, has recently caused consumer confidence to tick back down, increasing uncertainty among service sector businesses.
Vaccinations, though, are weakening the link between cases and hospitalizations, meaning the economic consequences of a new wave of coronavirus cases will be far milder than those of previous waves, Rory Fennessy, an economist at Oxford Economics, said in a note.
Nonetheless, depending on how the pandemic evolves, “the potential ramifications of the Delta variant are the main downside risk to the outlook,” he said.