EU GDP Rebounds
The Eurozone reported strong financial results for the third quarter of this year as it returned to profitability over the summer. However, France and Germany have recently reimposed national lockdowns due to a resurgence in coronavirus cases and it remains to be seen how the region will cope with it as it heads in the fourth quarter.
In Q3, Eurozone GDP grew by 12.7%, compared to the previous quarter, as per the flash estimate published by the bloc’s statistics office today, outstripping consensus estimates of 9.4%.
Following a sharp decline of 11.8% in the second quarter, Eurozone recorded the strongest recovery in history. However, the gains are likely to get capped as European leaders reintroduce some measures.
“The euro zone economy came roaring back in the third quarter as lockdowns ended, though a full recovery is still some way off, and a setback now looms in the fourth quarter,” said Claus Vistesen, an economist at macroeconomics research provider Pantheon Macro.
Insee, the statistics office in France, said that the country's gross domestic product rose by more than 18% between July and September. During the second quarter, France’s GDP shrank by 13.7% — a time when the country was in the middle of a nationwide lockdown following the coronavirus outbreak.
“The massive increase in French GDP in the third quarter is of no comfort to French policymakers or households, who are now contending with a second national lockdown,” said Andrew Kenningham, head Europe economist at Capital Economics.
Insee pointed out that even during the summer, France’s GDP was much lower than its pre-COVID levels. Furthermore, France’s GDP in the third quarter was 4.3% lower compared to the same period last year.
The government reintroduced the nationwide lockdown starting today following a sharp surge in new coronavirus cases over recent weeks. The new measures include closures of restaurants, bars, and non-essential stores, while schools and factories will stay open.
“We now have to contemplate the idea of a double-dip as the economy is knocked back by new restrictions,” Vistesen added.
According to the latest data from European authorities, around 46% of global COVID-19 infections are based in Europe, while a third of the global number resulted in deaths. Spain has also announced a state of emergency in October and reintroduced certain measures to relieve the pressure on the healthcare system.
France’s Ministry of Social Affairs and Health said that over 50% of intensive care unit beds are occupied by people infected with the coronavirus. The country reported over 52,000 new infections as the actual number of daily infections. It could be as high as 100,000 if those who don’t have any symptoms or haven’t been tested are included.
ECB Prepared to Step In Again
The European Central Bank stated yesterday that it would not make changes to the eurozone interest rates but added that it would consider providing additional support to the economies as the region heads into the second wave.
The bank maintained the interest rates at 0.0% and said it would carry on with its asset purchase incentive at €1.35 trillion ($1.58 trillion).
The existing risks to the European economy were "clearly tilted to the downside," the ECB said and noted that its team plans to evaluate its economic prospects and will make a decision on further measures based on that assessment.
"On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path," the ECB stated.
The Eurozone reported the strongest-ever economic recovery, including a GDP growth of 12.7% in the third quarter, but the uncertainty related to the surging number of new COVID-19 infections have pushed European stocks lower.
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Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.