However, the EU economy is still about 4% smaller than it was at the end of September last year and analysts expect the recovery to take place in a short time.
Chief Europe economist at Capital Economics, Andrew Kenningham, said in a research report: “It̵7;s hard to think of another occasion when such ‘good news’ would bring so little cheer. . “The second wave of coronavirus restraint is about to push the single currency sector into a double recession,” he added.
Governments in Germany and France, the region’s largest economies, on Wednesday announced the nationwide closure of the coronavirus, which would shut down non-essential businesses and restaurants for several weeks. Italy has announced a partial shutdown, which includes closing bars and restaurants at 6 p.m., but it could enforce cover restrictions if the epidemic worsens.
ING economist Charlotte de Montpellier said France had “entered a second decline” after third-quarter GDP rose a record 18.2 percent and the outlook for a significant recovery in 2021 was “darkening”. “Unfortunately, [third quarter] The numbers are ancient history and the restoration is over, “she wrote in a research note on Friday.
Schools and some facilities will remain open in Germany and France, as well as sectors such as construction and manufacturing, which will partially offset the size of the decline in GDP.
Another mitigating factor is that economies have fallen into a bleak state, unable to fully recover from the historic declines in the second quarter, which means that a further decline in GDP will be relatively less serious. than.
The German economy grew 8.2% from July to September, but down 4.2% over the same period last year. In Spain, where GDP grew 16.7% in the third quarter, the economy was 8.7% smaller than the same period in 2019. The Italian economy recovered 16.1% in Q3, but fell 4. , 7% over the previous year.
“Upcoming news signals that the eurozone economic recovery is losing momentum faster than expected after strong but partial and uneven economic recovery in the months,” Lagarde said. summer”.
She signaled that the ECB is ready to act to support the economy and said the central bank is examining all its potential instruments. Governments may also be called upon to increase spending.
“The policymakers’ dilemma is the most effective way to counter the blow from another fiscal round of much more generous fiscal support,” said Kenningham of Capital Economics. perhaps including one-time cash transfers to households and businesses ”.
The EU unemployment rate stabilized in September at 8.3%, according to Eurostat, but Kenningham warned that the labor market is likely “to be increasingly tense in the coming months.”
– Chris Liakos and Julia Horowitz contributed to the report.