Euro zone GDP in record slump; inflation ticks up

Daniel Fowler
August 2, 2020

The French government is taking account of an economic downturn of 11% for the whole of 2020.

The coronavirus pandemic sent the USA economy plunging by a record-shattering 32.9% annual rate last quarter and is still inflicting damage across the country, squeezing already struggling businesses and forcing a wave of layoffs that shows no sign of abating.

"The staggering news of the historic decline of the gross domestic product in the second quarter should shock us all", US Chamber of Commerce Executive Vice President Neil Bradley said in a statement. Earlier this month, European Union leaders approved a €750bn (£677bn, $890bn) coronavirus recovery package in Brussels, of which around half will be issued as grants to struggling member states. The pain was so damaging to jobs and industries that the government is talking down the possibility of another nationwide lockdown as infections tick upward again.

Asian and European stocks struggled on Friday on news of rapidly-shrinking economic activity, highlighting the "devastating impact" of coronavirus on the global economy, analysts said.

Rosie Colthorpe, European economist at Oxford Economics, said the current third quarter was likely to see high growth rates, "but not almost large enough to make up for the damage".

The official Eurostat agency said that, with much of the economy paralysed by coronavirus lockdowns, the fall was "by far" the largest since it began recording the figure in 1995.

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In France, the startling plunge of 13.8% in April-June was the third consecutive quarter of contraction in France's worsening recession. In France, COVID-19 has now killed more than 30,000 people and infected more than 186,000.

INSEE noted that overall "the gradual ending of restrictions led to a gradual recovery of economic activity in May and June, after the low point reached in April".

Locked-down families, many surviving on government handouts and job-preservation schemes, tightened their purse strings amid fears for jobs but also because shops were closed. It came after a 5.2 per cent drop in the first quarter, dragging Spain into its steepest recession ever, at a record pace.

In the first quarter of 2020, GDP decreased by 3.6% in the eurozone and fell by 3.2% in the EU.

The second quarter's drastic drop-off can be attributed to months of pandemic-related shutdowns.

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