Euro zone GDP beats forecasts for the third quarter, but new lockdowns threaten recovery

LONDON — The euro zone economy bounced back in the third quarter as the region profited from a summer stretch with few social restrictions. However, the focus is now on the final quarter of the year after its two largest economies, France and Germany, heralded nationwide lockdowns.

Gross domestic product for the euro zone expanded by 12.7% in the third quarter, compared with the former three months, according to a flash estimate released by the bloc’s statistics office Friday. Analysts had expected flowering of 9.4%, according to Reuters.

The increase — the sharpest-ever on record — marks come back for the region after it contracted by 11.8% in the secondarily quarter. But this momentum is likely to be limited as governments tighten social restrictions once again.

“The euro zone thriftiness came roaring back in the third quarter as lockdowns ended, though a full recovery is still some way off, and a setback now parts in the fourth quarter,” Claus Vistesen, economist at Pantheon Macro, said in a note.

The region-wide statistics came after country-specific proliferation figures earlier Friday.

France’s GDP grew by 18.2% between July and September, the country’s statistics assignment, Insee, said in a preliminary reading. France’s GDP had contracted by 13.7% during the second quarter, which included the basic full month (April) of nationwide lockdown in the wake of the coronavirus pandemic.

“The massive increase in French GDP in the third accommodate is of no comfort to French policymakers or households, who are now contending with a second national lockdown,” Andrew Kenningham, chief Europe economist at Select Economics, said in a note.

Despite the improvement during the summer period, “GDP remained well below the level it had beforehand the health crisis,” Insee said. On an annual basis, the third quarter reading came in 4.3% lower from a year ago.

French President Emmanuel Macron announced on Wednesday a second lockdown starting Friday due to a rapid increase in the tot up of infections over the past weeks. This means that restaurants, bars and non-essential shops are closing before again. However, schools and factories will keep their doors open.

“We now have to contemplate the idea of a double-dip as the curtness is knocked back by new restrictions,” Pantheon Macro’s Vistesen added.

In Germany, third-quarter GDP expanded by 8.2% rivaled to the previous quarter, on the back of more consumption from households, a solid increase in exports and positive activity in concocting, the country’s statistics office, Destatis, said.

The German economy had contracted by 9.8% in the second quarter of the year.

“These rises are about to be washed away by the second wave of Covid-19 and a new round of national lockdowns,” Kenningham also said.

Andreas Rees, chief German economist at UniCredit, agreed: “The likelihood of at least slightly shrinking economic venture in the fourth quarter is high.”

Earlier on Friday, Destatis revealed that retail sales dropped 2.2.% in September from the above-mentioned month, preliminary data showed on Friday. Retail of food, beverages and tobacco grew 6.8%, but sales in textiles, endowing, shoes and leather goods fell 7.3%, the German statistics office said on Friday.

The European Central Bank make one thought on Thursday that there will be more monetary stimulus coming to the euro zone. The central bank inclination revise its economic expectations for the 19-member area in December and will decide then how much more support is dire.

“We have done that in the past: We have responded very promptly, very appropriately, very heavily, some pass on say, to the first wave that hit the euro area economies. We have done it for the first wave; we will do it again for the impaired wave,” ECB President Christine Lagarde said on Thursday.