The eurozone’s four biggest economies outstripped expectations for growth in the third quarter with a rebound from their coronavirus-induced recession earlier in the year, but output remained well below pre-pandemic levels.
Quarterly growth rates in the three months to September ranged from 8.2 per cent in Germany to 18.2 per cent in France. Italy reported record quarterly growth of 16.1 per cent, while Spain’s output was up 16.7 per cent.
However, there were growing signs of divergence between countries depending on how hard their economies have been hit by the pandemic — with Spain suffering the greatest impact.
France’s economic output was down 4.1 per cent from its pre-pandemic level at the end of last year, while Germany’s economy was down 4.2 per cent and Italy’s GDP was 4.7 per cent smaller. That compared with Spain’s 9.1 per cent gap from pre-pandemic levels — reversing its position as one of the fastest growing economies in the eurozone before the virus struck.
The third-quarter resurgence highlights how businesses and consumers ramped up output and spending once lockdowns were lifted in May.
But the recovery is already being undermined by the recent partial reimposition of restrictions in many European countries after daily coronavirus infections rose to new highs, putting a dampener on activity and confidence since September.
Peter Altmaier, Germany’s economy minister, said the government had cut its quarterly growth forecast for the final quarter of this year from 1.1 per cent to 0.4 per cent to reflect the impact of the country’s new “lockdown light” measures, which have closed bars, restaurants and entertainment venues.
However, some economists have a more gloomy outlook for the eurozone’s biggest economy — despite its third-quarter outperformance.
“A double-dip looks unavoidable,” said Carsten Brzeski, economist at ING. “There is unfortunately still no evidence that you can simply turn on and off an economy like a light switch without causing more structural damage, maybe even a short circuit.”
Separate data also published on Friday showed that French consumer spending on goods fell unexpectedly in September, dropping 5.1 per cent from the previous month — taking it back below pre-pandemic levels for the first time since May. French consumer prices remained unchanged for the second consecutive month in October on an annual basis.
“Even before President [Emmanuel] Macron’s announcement of a new nationwide lockdown on Wednesday, which took effect at midnight last night, new coronavirus restrictions were undermining the recovery,” said Andrew Kenningham, an economist at Capital Economics.
Economists at Berenberg predicted that the new restrictions would cause another serious contraction in the French economy in the final three months of this year. “French GDP now looks set to decline significantly in the fourth quarter, possibly by 3 to 4 per cent,” they said.
Separate figures published on Friday painted a similar picture for German retail sales, which fell much more than expected in September, fuelling fears that the country’s consumer sector was losing steam even before the new semi-lockdown.
The volume of retail sales in Germany fell 2.2 per cent in September compared with the previous month, down from a 3.1 per cent expansion in August, official data showed.
French household spending rebounded 17.3 per cent in the third quarter, leaving it 2.1 per cent below last year’s level, while public sector consumption regained all its lost ground and ended the quarter 0.4 per cent above last year’s level.
In Spain, demand recovered more strongly, down 6.8 per cent on last year’s level, while investment was 12.8 per cent below its level in the third quarter of 2019.
Spain’s sharper fall in output partially reflects the lack of international tourists in a country that relies on foreign visitors’ revenues more than its peer economies.
Spain also registered soaring infections and tightening restrictions earlier than most other European countries, which damped demand in September and choked activity from the onset of the final quarter.
Italy’s performance was stronger than Spain, despite its large tourism sector, partially thanks to a rapid recovery in its manufacturing sector — the second largest in the eurozone after Germany — as well as a slower resurgence of the virus.
On Thursday the US commerce department reported that the US economy grew at a quarterly rate of 7.4 per cent in the three months to September, rebounding to within 3.5 per cent of its level at the end of last year.