Eurozone’s record 3Q growth clouded by virus
FRANKFURT, Germany — The European economy grew by an unexpectedly large 12.7% in the third quarter as companies reopened after severe coronavirus lockdowns, but the rebound is being overshadowed by worries that growing numbers of infections will cause a new downturn in the final months of the year.
The upturn in the JulySeptember quarter, and the worries about what’s ahead, echoed the situation in the United States. Reopenings there led to strong thirdquarter growth of 7.4% that recovered much of the drop from the first part of the year — but didn’t dispel fears for the winter months.
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The rebound was led by France, with an 18.2% increase, followed by Spain with 16.7% and Italy with 16.1%.
Rosie Colthorpe, European economist at Oxford Economics, said the gains made up almost three-quarters of the lost output from the first six months of the year. But she added that “new containment measures mean we think the recovery will grind to a halt in the fourth quarter, with output expected to fall once again.”
European Central Bank head Christine Lagarde said Thursday she expected November to be “very negative,” adding that “most likely our fourth quarter number will be to the downside. Will it be negative? We don’t know at this point in time.”
Manufacturing companies have seen a stronger bounce back than services. Automakers like Volkswagen and Daimler AG’s Mercedes-Benz have seen sales and profits rebound, helped by their exposure to China, where the virus hit earlier but has since mostly been contained.
Meanwhile, businesses that rely on face-to-face interaction, such as restaurants, hotels and airlines have been devastated and are seeing only a small fraction of their previous business. Rising infections led the German government to order theaters, bars and restaurants to close from Monday through Nov. 30.
France on Friday re-imposed a nationwide lockdown for the next month, closing all non-essential business and forbidding all movement beyond 1 kilometer, or just over half a mile, from home except to go to school or for a few other essential reasons. The government is promising more aid to businesses hit by the lockdown, on top of hundreds of billions already spent this year on temporary unemployment and other measures.
Transport company FlixMobility said it was temporarily halting its Flix Bus service in Germany, Austria and Switzerland and Flix Train service in Germany starting Tuesday, saying that the government has asked people to limit travel as much as possible. The company said that Flix Bus hoped to resume in time for the holidays; FlixTrain plans to resume “once the situation around corona improves in 2021,” a company spokeswoman said in an email.
Lagarde indicated that the central bank was working on a new package of possible stimulus measures to be discussed at the bank’s Dec. 10 meeting and said there was “little doubt” that it would be implemented, given deteriorating conditions. The bank did not adjust its stimulus efforts on Thursday; it is already pumping $1.58 trillion in newly printed money into the economy through regular bond purchases, a step aimed at keeping affordable credit flowing to businesses.
The jobless rate in the 19 countries that use the euro was steady at 8.3% in September compared with August. The rise in unemployment has been held down by government support programs that pay most of workers’ salaries if they are put on short hours or no hours instead of being laid off.