Greek economy unexpectedly surged before capital control impact

Greece’s economy grew in the second quarter in a surprise surge just before the standoff between the government and its creditors forced officials to impose capital controls.

The Hellenic Statistical Authority in Athens said gross domestic product rose 0.8 percent, as it revised up the first quarter to show stagnation. Nominal GDP, which excludes adjustments for price changes, fell 0.7 percent in the period through June.

“The national accounts provide a wealth of information, but they’re not very timely, they’re mostly a look back,” said Daniele Antonucci, an economist at Morgan Stanley in London. “Growth momentum has turned increasingly negative most recently.”

The data came as a shock after economists in a Bloomberg survey forecast a 0.5 percent contraction. Recent reports painted a picture of an economy crippled by months of haggling over a new bailout and question marks over the nation’s future in the euro.

That turmoil forced the government to increase its use of emergency funds to keep banks afloat and introduce controls to stem an outflow of capital.

The second-quarter data doesn’t capture the impact of the banking-system shutdown, which came into effect at the end of June. A Greek manufacturing index fell to a record low in July, with companies citing a “generally uncertain operating environment.”

Data Skepticism

David Powell, chief euro-area economist at Bloomberg, said the second-quarter numbers should be taken “with a grain of salt” because there may have been a temporary boost to domestic demand as consumers increased spending in anticipation of the measures.

“It was better to have goods, than euros locked up in a bank,” he said in an interview with Bloomberg Television’s Manus Cranny and Francine Lacqua. “These numbers may be artificially inflated by very high household consumption figures that may not be repeated.”

Eurostat, the EU’s statistics office, will publish second- quarter data for the currency region on Friday, which is forecast to show 0.4% growth. That will follow national reports from France, Germany, Italy and the Netherlands. Spain’s economy grew 1 percent, according to a provisional estimate published on July 30.

[Bloomberg]