Euro zone GDP revised up, but still a record drop

Consumer spending collapsed in second quarter due to Covid-19

The contraction in the April-June period was the steepest in a data series that began in 1995. Photograph: iStock

The contraction in the April-June period was the steepest in a data series that began in 1995. Photograph: iStock

 

The euro zone economy declined by slightly less than initially estimated in the second quarter, but the drop was still the sharpest ever as consumer spending caved in due to Covid-19 restrictions.

Gross domestic product (GDP) fell by 11.8 per cent from the previous quarter and by 14.7 per cent year-on-year, data from the European statistics agency Eurostat showed on Tuesday. That compared with initial estimates of respectively 12.1 per cent and 15.0 per cent reported at the end of July.

The contraction in the April-June period, during which Covid-19 restrictions were in place across the continent, was the steepest in a data series that began in 1995.

In the first three months of this year, the contraction was already 3.7 per cent quarter-on-quarter and 3.2 per cent year-on-year. The sharpest second-quarter declines from the previous quarter were in Spain, Greece, Portugal and France.

Household spending had the greatest negative influence, cutting 6.6 percentage points from growth, followed by gross fixed capital formation at minus 3.8 points.

Net trade, government spending and inventory changes also had a negative impact.

Eurostat also reported that employment fell by 2.9 per cent in the second quarter, also the sharpest decline since records began in 1995, after a 0.3 per cent drop in the first three months of 2020.

The impact was moderated by government support schemes, but the decline in hours worked, at 12.8 per cent, was more pronounced. - Reuters