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Eurozone economy posts record growth but Covid set to knock recovery

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Eurozone economy surges in third quarter but growth is set to slow
The Eurozone economy surged in the third quarter after the historic contraction of the spring, but countries including Germany have since put new lockdown measures in place

The Eurozone economy handily beat expectations in the third quarter of the year with record growth, although surging coronavirus cases and new lockdowns now look set to knock the recovery off course.

Eurozone GDP grew 12.7 per cent in the third quarter, having slumped 11.8 per cent in the April to June period, the EU’s statistics body Eurostat said. That was well above economists’ predictions of a 9.4 per cent rebound.

France, Germany, Italy and Spain all posted better-than-expected GDP figures this morning. The growth broke quarterly records after the equally record-breaking contraction in the second quarter.

However, economies remained much smaller than their pre-coronavirus size. Eurozone output as a whole was 4.3 per cent lower, while Europe’s biggest economy Germany was 4.2 per cent smaller.

And since the end of the third quarter in September, new coronavirus cases have once again hit record highs in various Eurozone countries.

Eurozone economy could see ‘double-dip recession’

Governments have put in place new lockdowns which are likely to severely constrain growth in the final quarter. France has gone into a second lockdown and Germany has put in place “circuit break” restrictions.

Stock markets are on track for their worst week since March, after investors reacted badly to the new measures.

“This positive EU GDP data comes against a backdrop of surging virus cases and a feeling of deja vu,” said Robert Alster of Close Brother Asset Management.

“These dark economic clouds are likely to squash any green shoots of recovery in the services sector as fears of a double dip recession take hold.”

Eurostat said France achieved the strongest quarterly growth with an 18.2 per cent expansion. Its economy had contracted 13.7 per cent in the second quarter.

Spain was second-best with 16.7 per cent growth after contracting 17.8 per cent. Italy grew 16.1 per cent after a 12.8 per cent drop, and Germany expanded 8.2 per cent after shrinking 9.8 per cent in the second quarter.