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  • July 30, 2021

The vaccination push has reaped benefits: This week, the European Union pulled ahead of the United States in total vaccinations, adjusted for population, a turnaround from the spring.

Europe’s four biggest economies recorded expansions over the April-to-June quarter, with the most robust growth in southern Europe, in countries that suffered the brunt of Covid-19 deaths last year.

Italy grew 2.7 percent and Spain 2.8 percent from the first quarter, while Portugal’s and Austria’s economies surged more than 4 percent, thanks to a rebound in tourism. But growth was weaker than expected in Germany, Europe’s largest economy — 1.5 percent from the first quarter, perhaps reflecting supply chain problems as a shortage of electronic chips has slowed manufacturing in its huge auto industry.

The French economy, however, struggled to climb out of a recession, growing 0.9 percent from April to June after zero growth in the first three months. President Emmanuel Macron has been trying to coerce the French into getting vaccinated in a bid to cement a recovery.

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 has risen to 2.2 percent in July after a 1.9 percent rate last 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 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, to 7.7 percent in the 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.

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