Greece’s GDP growth accelerated to 2.3% y-o-y in Q2:2024, with q-o-q s.a. growth at +1.1%, the strongest pace among euro area economies.
• Private consumption increased at a steady annual pace of 2.0% y-o-y in Q2:2024 (+0.6% q-o-q, s.a.), on the back of: i) supportive labor market conditions (total nominal compensation of employees was up by 5.6% y-o-y and by 3.0% y-o-y in CPI-deflated terms), ii) lower CPI inflation (2.6% y-o-y from 3.1% in Q1), with a more significant deceleration in the food component (+3.5% y-o-y in Q2 from 6.8% in Q1), iii) rising non-labor income (rents, interest, and dividends), and iv) accelerating consumer credit (+5.8% in July, from 4.5% y-o-y in March 2024, with cumulative consumer credit flows in 7M:2024 at a 15-year high of €0.4 bn).
• Gross fixed capital formation edged further upwards, rising by 3.9% y-o-y in Q2 from 3.1% y-o-y in Q1:2024, despite the negative contribution of total construction (-2.1% y-o-y). GFCF excluding construction rose by 7.6% y-o-y in constant price terms, with spending on machinery and transport equipment up by 12.2% y-o-y in Q2:2024.
• Construction activity was held back, for a second consecutive quarter, by unsupportive base effects, labor shortages and an estimated slowing in public works. Residential construction dropped by 7.1% y-o-y (compared with a decline of 13.9% in Q1:2024 and a strong increase of +45.8% in Q2:2023) and non-residential construction increased marginally by 0.7% y-o-y (over a robust +15.1% in Q2:2023).
• A sizeable pipeline of public and private investment projects, more supportive base effects on construction and accelerating PIB spending are expected to sustain an annual GFCF growth of 8.2% in FY:2024.
• The external sector experienced strong performance by both goods and services exports, while buoyant imports largely reflect expenditures on production inputs rather consumer goods. Nonetheless, net exports had a strongly negative contribution to Q2 GDP growth of -3.4 pps, as the sharp increase in imports of production inputs outweighed the positive effect from the rebound in goods exports (+2.0% y-o-y and +5.2% q-o-q s.a. from -8.6% y-o-y in Q1) and rising services exports (+2.8% y-o-y).
• The sustained tourism momentum, which remains on track for a new record year, along with supportive base effects and higher goods exports, should limit the external imbalances in Q3:2024.
• Strong demand and business activity encouraged further inventory build up, which added 3.8 pps to annual GDP growth in Q2:2024. However, the net contribution was limited if we account for the high import content of this GDP component.
• Production-side data for Q2 showed that GVA generated by the industry sector contributed 1.6 pps in total GVA growth of 2.0% y-o-y, with the share of this sector in economy-wide GVA rising to an all-time high of 16.3%. Similarly, the manufacturing production index climbed to a 16-year high in Q2:2024, on the back of a broad-based increase in sectoral activity.
• Latest information from the ESI sectoral business surveys for July-August as well as VAT revenue, PIB and inbound-tourism arrivals trends point to a modest acceleration in GDP growth in Q3:2024 to c. 2.4% y-o-y, according to the NBG’s Economic Analysis nowcasting model, with our baseline forecast for GDP growth in FY:2024 remaining unchanged at 2.4%.